Putting your house or any asset in joint tenancy with a child and giving rights of survivorship has legal consequences that few people know. Yet in my experience, it is not uncommon for seniors in Cincinnati who rely on their children for assistance to add a child’s name to bank accounts, brokerage accounts, deeds and other property without realizing the significance of their action or how it alters their estate plan.
It is fairly common for a senior parent to put a child’s name on one or more asset. Doing so enables the child to write checks, call a broker and assist with account transactions, making matters more convenient for an aging parent.
However, in Ohio, putting an asset in joint tenancy with rights of survivorship is conclusive evidence of an intent to transfer a survivorship interest in the balance of the account's assets after death of the parent. It basically tells that child, “I want you to have this asset when I’m gone.” Such transfers can raise problems:
1. If after the transfer occurs, your child is sued, goes through a divorce, has a tax lien, loses a job or declares bankruptcy, you may find that your child's creditors are now joint owners. In fact, these creditors may be able to foreclose on your assets to get at your child's fractional share.
2. Transferring an interest in an asset, in excess of $13,000 per person, in joint tenancy with a child or your children can potentially create a taxable gift under IRS regulations.
3. When you sell the home, you may be only able to use your primary residence exemption (up to $250,000 of the gain on the sale) only on your fractional share. Your children may have to pay long-term capital gains on their shares, which could have been avoided if the house was still titled just in your name.
4. Following your death, the probate attorney advises all the children that any child with joint tenancy owns that asset and that the other siblings have no interest in it. Thus, if you add only one child’s name to the account or asset, that child is the beneficiary and legal owner. The other children likely have no right to that asset under Ohio law, even if your Last Will and Testament provides for an equal division of the assets between the children.
Creating a joint with survivorship interest with a child can thus cause numerous unintended consequences. There are many alternative ways that a parent can arrange for a child to help them manage their assets. An estate planning attorney who has worked with many families can help you avoid the issues involved with placing assets in joint tenancy with a child. That is the best way to assure your piece of mind – and your children’s financial future.
If you have any questions about any of the information contained in this blog, see my estate planning website or contact Cincinnati attorney David H. Lefton at 513-399-PLAN (7526) or by email at email@example.com.