Why Is Naming Your Child As Joint Owner Or Beneficiary Of A Bank Account A Mistake?
As a parent, making sure that your children are taken care of is likely your biggest priority. You may have even started the estate planning process to ensure they are financially supported in the future, even after you pass away. You might think that designating your child as a beneficiary on, or co-owner of, your bank account is a good way to ensure they are secure. Unfortunately, this is a common misconception. Using this approach can actually result in unintended consequences that could put your goals in jeopardy.
Lack of Control
Naming your child as a co-owner on your bank account grants them access and control over your funds. This may seem convenient, but it could also result in your children using the funds for their own benefits without any thought to your needs or wishes. Also, co-ownership can leave your assets vulnerable to your child’s legal liabilities, such as their creditors. This can place your hard-earned resources at risk.
Possible Tax Consequences
If you transfer ownership of your property to your children, it could have unintended tax implications. Depending on the applicable tax laws and the amount being transferred, it could result in gift tax implications, or reduce the total estate tax exemptions available.
Family Disputes
If you name one child as joint owner or beneficiary of your bank account and exclude others, it could result in family disputes. Children who are not named beneficiary or co-owner may not receive equal distributions, and that could result in disputes that can ultimately fracture the family relationships and dynamic. This is true even if you did not intend an equal distribution. By creating a comprehensive estate plan that is transparent and fair to all of your children, it can reduce family disputes and ensure family harmony for generations to come.
No Asset Protection
Bank accounts are exposed to the liabilities of all owners. This means if you name your child as co-owner or beneficiary of your bank account and they experience legal problems or financial difficulties, the savings you have worked so hard for may be at risk. Creditors may be able to seize the funds in the account or legal judgments, such as liens can be placed against them. If this happens during your lifetime, it may leave you without sufficient funds to cover even your daily expenses.
Our Wills and Trusts Lawyer in Daytona Beach Can Help Protect Your Family
Naming your child as co-owner or beneficiary may seem like a fairly straightforward way to ensure that they have access to funds if they need them. Unfortunately, this can create more problems than it solves. At Bundza & Rodriguez, our Daytona Beach wills and trusts lawyer can advise on the other elements of estate plans that can provide the protection you want to provide for your children while also protecting your assets. Call us today at 386-252-5170 or contact us online to schedule a consultation with our experienced attorney and to get more information.
Source:
leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0736/0736.html
