Why Jointly Held Accounts Are Not The Best Plan for Families

In trying to seek help from one's adult children or help out one's aging parent, joint ownership may seem an attractive and inexpensive option, yet it is another case of best intentions with some serious possible unintended consequences.  My friend and colleague, Mike Lichterman, of Lichterman Law in Michigan recently posted here in response to a Forbes.com article on the perils of joint account ownership between parents and adult children.  Mike nicely summarized the high points of the article and with his permission I've reposted his post below, though I too suggest you read the entire Forbes article yourself.  

Why NOT To Use Joint Accounts As Your Estate Plan
October 2, 2011

You may remember that I wrote about some of the downsides to jointly owning assets in this previous blog post.   Well, as with all good stories, that wasn’t the end of it and the topic continues to come up.  Forbes.com had a recent article entitled “Top 5 Reasons to Beware of Joint Ownership Between Generations.”

Rather than reproducing the article, I will touch on the high points . . . please read the entire article.  Unlike my previous post covering a wide view of why not to use joint asset ownership as an estate plan, this article focuses on the top reasons related to joint ownership among different family generations.  I’ve heard more than one parent who shared with me that they were told to “just add your child to your bank accounts, financial accounts, and home to assist with financial issues and plan your estate.”

Here are the reasons the Forbes article gives for why that is a no substitute for proper estate planning:

1. The assets are subject to the child’s creditors;
2. The assets are subject to the child’s ex-spouse in cases of divorce;
3. The assets are subject to “borrowing” by the child.  Borrowing is in quotes to signify that this is a case where the child, because he or she is equal owner on the account with mom or dad, uses the account for their own purposes - promising (or not promising) to pay it back.
4. The child who is on the accounts with mom or dad gets all of those assets when the parents pass away.  That’s right . . . all of it!  Much to the chagrin of their siblings, other family members, and maybe even charities that mom or dad supported.
5. Many times #4 can lead to family infighting.

Another critical factor making this a big “no no” in many situations is that by owning the assets jointly with their children, the parents are giving up control and risking complications that many would never think of happening.

As the article points out – it is better to have a comprehensive estate plan in place and to work with a Michigan attorney who focuses on estate planning.  A good estate plan allows you to keep control of your “stuff,” receive assistance when needed, avoid probate court after death, and eliminate questions about your true intentions.