This blog series will focus on holding real estate and accounts jointly, and specifically, the hidden perils associated with using joint ownership with your adult children as an Estate Planning tool. These issues often come up when I am meeting with widows and widowers.
The following problems can arise when holding assets jointly:
- Creditors, lawsuits, divorce, and financial difficulties
- Needs-based benefits eligibility
- Undermining the Estate Plan
- Loss of control
Problem No. 1 – Creditors, Lawsuits, Divorce, and Financial Difficulties
First and foremost, holding property jointly can leave funds unprotected from the creditors of both owners. For our purposes today, let’s assume that “creditor” means any person or institution with a potential claim against a joint owner’s assets (e.g., a lender, a divorcing spouse, etc.). If a joint owner gets attacked by a creditor, a jointly-held asset may be subject to the creditor’s claim depending on State law. This means that the asset could potentially be lost. For this reason in particular, it may not make sense for you to hold assets jointly with your children. Discuss it with your estate planning attorney before taking action.
Problem No. 2 – Needs-Based Benefits Eligibility
Putting a child on the deed to a home (as a joint tenant) may result in a non-exempt transfer of a resource depending on State law. Non-exempt transfers may result in a penalty period being tacked on for determining eligibility for Medicaid. Bottom line, these rules are very complicated and should be discussed with an Estate Planning attorney who is well-versed in planning for needs-based benefits such as Medicaid, and SSI.
For more general estate planning information, click here to visit my law firm’s website