Many local residents have found themselves facing unexpected problems after trying to create a New York estate plan on their own. Community members often mistakenly believe that joint ownership of property and accounts can be used to avoid probate and transfer assets. While joint ownership may be helpful in certain circumstances, in most cases it leads to a variety of problems. Many families have descended into ugly and expensive court fights after a “do it yourself” estate plan was created using these joint accounts.
Last month Forbes published a story listing several reasons that families should beware of joint ownership. The author was particularly concerned about the problems faced by families with joint ownership between generations–such as when an adult child shares control with an aging parent. Adult children are frequently names included on bank accounts, homes, cars, and other investments. Good intentions often lie at the heart of these decisions, but complications usually arise. For one thing, parents often face unwanted exposure to creditors when there is more than one name on an account. When an elderly parent has their child added to the account, the child’s creditor may be able to access the funds. This is the case even though the child may have added none of his or her own money into the account and even though the parent had no involvement in the debt. Other circumstances could also present problems. For example, if the adult child gets divorced the ex-spouse may claim the joint assets as part of the marital estate to which they have rights.
Beyond that, many families have set themselves up for inheritance fights because of joint asset control. Upon the death of the parent, the child whose name was on the account or property usually retains sole ownership. Sometimes this may be exactly as intended. However, in other cases, there may have been an understanding that the assets should have been shared among siblings. Regardless of the intention, the child who control the assets is likely under no legal obligation to follow those wishes upon their parent’s passing. Even in those cases where it was intended for the named child to take the property, the other siblings may still seek to challenge it. No matter what the court ultimately decides, costly, timely, and stressful legal wrangling would result.
Besides estate problems, joint accounts also affect long-term care planning. If a local resident is hoping to qualify for New York Medicaid assistance, the program will assume that the applicant owns all funds in a joint account. In addition, transfers out of the joint account may be deemed improper under Medicaid rules leading to a period of Medicaid ineligibility. Area families should take all of these concerns into account. In virtually all cases there are better ways to plan for the future, and a New York elder law estate planning attorney can explain the wide range of legal tools available for the effort.
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