As you age, you may be tempted to add one of your children to your accounts so they can help you manage your finances. One of the helpful tellers at the bank may even suggest this to you as a way to ensure the account avoids probate or to make sure the child who has been helping you will have access to the money if something unexpected happens. We understand there are a lot of reasons you may want to do this, but adding a child as a joint owner on your account can have serious, often unintended consequences
In South Carolina, if someone owns an account jointly with you when you pass away, that account becomes theirs. This happens even if your Will says otherwise. While this can sometimes be fixed through litigation after you have passed away who wants their kids to have to go through that? We have had countless potential clients come in to our office wanting to sue their brother or sister who ended up with the majority of their parent’s money because they “tricked” that parent into adding the child’s name to the account. These can be tough cases and no matter what happens, chances are the kids never going to speak to one another again after going through this type of litigation.
Of course, you may believe that your son or daughter would never keep the money, but would instead fairly split it among their siblings. This may be the case, but if they are going to be giving more than $14,000 each to their siblings, they will need to file a gift tax return. Depending on how large the amounts are, they may also have to pay taxes on the amounts they are gifting.
Even when there is only one child, having them as a joint account holder can create issues. For instance, if they go through a divorce, are sued, or file bankruptcy, you may have just exposed your money to their problems.
The good news is, there is a better way to handle this in South Carolina. If your goal is to make sure one of your children can manage your assets for you in an emergency, a simple power of attorney will handle that without the need to ever add the child’s name to the account. If avoiding probate is your main goal, a revocable living trust gives you full power over everything you own while you are able to handle it while allowing a trusted child or family member to manage things later on, and it ensures that all assets passing through the trust avoid probate. Either of these documents can help prevent years of nasty litigation between children and protect your assets from children's problems.
If you or someone you know are interested in learning more about how to protect assets and avoid these types of disputes among heirs, feel free to give us a call to set up an appointment or request a copy of our free book 5 Reasons a Simple Will Might Not Be Enough.
