Berman & Asbel, LLP

Why not make my kid a joint-account holder?

A joint bank account allows a surviving spouse to somewhat seamlessly continue to have access to liquid assets after the death of the other. After all, the surviving spouse owns the assets. Why not use a similar plan involving a child or a friend? Doing so would help avoid the money getting tied up in the probate process in Philadelphia. 

True, this a path chosen by some during estate planning. However, this is a prime example of a decision that could lead to unintended consequences when made without the advice of an estate planning attorney. 

"What are the risks?" Our readers may be wondering. "I trust them enough to give them access to my money, why would there be an issue?" Trust isn't always the issue. Granting joint-holder status not only allows the named individual access to the funds, but it could leave it open to that person's creditors as well. 

Creditors can generally "go after" funds in a bank account to which the debtor has open access to or control over. In this case, a joint account precisely fits the bill. While there are some ways to counter a creditor's claim, they are certainly not always easy or stress free. In fact, the road to proving that the creditor has no claim is often very difficult. 

As stated above, trust is often not the issue. Even a kid that would do anything for his or her parents can make financial mistakes, run into an unpredictable situation or end up in an unexpected accident that costs money. Putting funds in a trust is one way to protect the assets from certain creditor claims -- whether the trust benefits the child, friend or the testator. 

Source: The Palm Beach Post, "Making child co-owner of accounts to avoid probate is risky," Joseph Karp, May 9, 2013

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