One of the relatively simple, often used, and inexpensive techniques is to merely add your child’s name to a bank account. This involves going to the bank and completing a signature card. With this common, joint account the funds are then subject to withdrawal by either or the survivor. An alternative would be to have the account in the client’s name with a beneficiary. This is normally called an in-trust for or payable on death account.
In these types of situations, the funds are not available to your child during your lifetime, but rather, pass to your child upon your death. In some cases, a bank will allow more than one beneficiary to be listed.
Unfortunately, these types of accounts do not protect assets from long-term care expenses. Since the assets are still available to you, and you have the right to withdraw the funds and are required to report their interest on your tax return, these assets are essentially still owned by you. This is, however, and effective tactic if your goal is simply to avoid the probate process.
If your child’s name is merely added to the account as a joint owner, then another issue that may come up involves a situation where your child is sued, dies, has marital problems, or becomes disabled himself. In these circumstances, there will be an issue as to whether those assets are truly yours, or available to your child, and a governmental agency or creditor of your child may attempt to attach those assets or cause them to be “accessible assets.”
In some cases, a trustee in bankruptcy may also attempt to cause those assets, or at least half of them, to be available to the creditors of your child since his name is on the account, despite the fact that the funds actually belong to you.
Needless to say, you usually cannot have your cake and eat it too, and therefore, it is critical that you understand the ramifications of merely adding your child’s name to your account.
Hyman G. Darling, Esq.
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