Adding adult children to accounts (aka “joint tenancy”) is one way to allow assets to pass on to them expediently, without going through the public process of probate, upon your death. Joint tenancy is simple to set up, but can backfire, so it is not recommended as a replacement for estate planning with the guidance of an attorney.
Poor Man’s Will
Joint tenancy is sometimes referred to as “a poor man’s will,” given that it provides a ready-made solution for passing assets to loved ones: “A poor man’s estate plan is when you simply just add all of your adult children to all of your accounts and property (joint tenancy) instead of getting a will drawn up. It is called a “Poor Man’s Will” because it doesn’t require hiring a lawyer.” Although joint tenancy seems simple and straightforward, it can result in unintended consequences, as these four examples, based on probate law in Michigan, illustrate:
- If the person who shares joint tenancy dies within 120 hours of the original owner of the property, the inheritance would be distributed according to Michigan’s Intestacy Laws.
- Once you add a person to your name and accounts, their creditors now can try to lay a claim to their assets if they carry a lot of debt.
- When the person in joint tenancy is in the middle of a divorce, the spouse can try to claim the joint assets as a part of their joint estate.
- All of the inheritance will go to the person that shares joint tenancy and this person may not honor your wishes on how to distribute the inheritance among descendants.
Once joint tenancy is established, if a will is later made, it’s important for the will and joint tenancy arrangements to work in sync with each other. Disconnects can result in
conflict and probate litigation.. To avoid unintended consequences, before setting up a joint tenancy, it is a good idea to have a basic “understanding of the rights of survivorship with joint bank accounts….” Although probate protocols differ by state, there are commonalities, and the Uniform Probate Code, adopted by many states, provides these “guidelines regarding the rights and responsibilities associated with joint bank accounts”:
- Right of Survivorship by Default: Generally, joint bank accounts are presumed to have rights of survivorship unless otherwise specified. This means that if no specific language is included in the account agreement indicating a different intention, the surviving account holder(s) will automatically assume ownership of the funds.
- Clear and Express Intent: The UPC emphasizes the importance of clear and express intent when establishing joint bank accounts. If the account holders intend for the account to have rights of survivorship, it is crucial to include specific language in the account agreement….
- Presumption of Equal Ownership: Under the UPC, joint bank account holders are generally presumed to have equal ownership rights unless stated otherwise….
- Creditor Claims and Medicaid Eligibility: In some cases, joint bank accounts may be subject to creditor claims or affect an individual’s eligibility for Medicaid benefits. The UPC allows for these situations to be addressed appropriately….
Good To Know
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