The addition of someone’s name to an asset held by you can be performed quite easily. However, the implications of this simple action can be profound. It is imperative that you understand the potential issues involved, which include, but are not limited to, estate, gift and capital gain taxation, creditor protection, probate avoidance, long term care and Medicaid (currently known in the Commonwealth of Massachusetts as MassHealth.)
A carefully drafted estate plan can take advantage of placing assets in a jointly held account. Jointly-held property is inherited by the surviving joint-owner(s) and, hence, eliminates the need for that particular asset to go through the probate process. Additionally, any joint owner can write checks on a jointly-held bank account, even after the death or disability of the other owner.
Assets, other than bank accounts, that are held in joint names can sometimes be considered inaccessible by MassHealth, and therefore not subject to the spend-down process. However, a haphazardly drafted estate plan that improperly places assets into a co-owner’s name can have disastrous results.
At the time of death, jointly-held assets are inherited directly by the surviving joint owner(s,) and a Will typically does not take those jointly-held assets into account when the total inheritance is divided amongst the beneficiaries. Therefore, inheritances are often skewed toward the surviving joint-owners.
In addition, on many bank accounts, each joint owner(s) has the right to withdraw everything from the account without the other joint-owner’(s) permission. Furthermore, jointly-held assets are exposed to lawsuits by creditors and divorcing spouses of each joint-owner. On the real estate side, adding another to a deed can have significant capital gain consequences.
Therefore, it is advisable to speak with an experienced estate planning attorney to verify that your assets are owned properly, as the consequences of an improper ownership can be considerable.
By: Todd C. Ratner, Esquire
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