Estate Planning Alert: The Hazards of Joint Titling Between Parent and Child
Parents sometimes title assets jointly with their children in order to avoid probate at the parents' death or, in the case of a bank account, to permit children to assist with the parents' banking and bill-paying. Joint titling between parent and child presents a number of potential drawbacks:
- At the parent's death, the account passes only to the child who is the other joint owner. If there are other children, such joint titling may defeat the parent's desire to benefit all children equally, since a will does not transfer jointly titled (or otherwise nonprobate) assets.
- The child has current rights to the asset, and the parent generally cannot act without the child's consent. Further, if the asset is sold, the child may have rights to a portion of the proceeds.
- In the case of a joint bank account, the child can withdraw from the account for his or her own benefit rather than that of the parent.
- The asset could be at risk if the child gets sued or divorced.
- If the child dies first, his or her estate may need to prove that the parent alone was the source of the funds in order to avoid inclusion of a portion of the asset in the child's estate.Probate can be avoided without any of the above drawbacks by the use of planning techniques such as self-trusteed revocable living trusts (for all types of assets), payable on death (POD) designations for bank accounts and transfer on death (TOD) designations for securities and (in Ohio) real estate, motor vehicles and watercraft. In addition, if there is a desire to have both the parent and child be able to access a bank account, the child can be given power of attorney on the account, with no effect upon the parent's ownership rights or upon the distribution of the account at the parent's death. As a result, the parent's objectives can be accomplished without potential negative side effects.
If you have any questions in regards to a child assisting with a parent's finances, please contact an estate planning attorney at Eastman & Smith.