Alana D. Horner, Esq.
It may seem simple and convenient to add an adult child, trusted friend, or other loved one to a bank account, investment account, or even the title of your home. Many people do this thinking it will “make things easier” if something happens to them or to pass along the asset on their death. However, from the perspective of a Florida elder law attorney, this shortcut often results in creating more problems than it solves.
1. Exposure to the Other Person’s Creditors
Once someone else’s name is on your account or deed, the asset is legally theirs too. If they are sued, go through a divorce, or face financial trouble, your property could be at risk of liens, judgments, or seizure.
2. Unintended Tax Consequences
Adding someone as a joint owner can be treated as a gift under federal tax law. That means you may face gift tax reporting obligations, and more importantly, your new joint owner and intended beneficiary could lose valuable “step-up” in basis benefits when you pass away—potentially increasing their capital gains tax burden.
3. Medicaid Eligibility Problems
If you ever need long-term care and apply for Medicaid, adding a non-spouse to your accounts or property could be viewed as a transfer of assets. If this change occurs within the 5-year lookback, it can trigger a penalty period of ineligibility, delaying much-needed benefits or resulting in a costly clean-up to cure the transfer.
4. Loss of Control and Flexibility
Joint owners generally have equal rights. That means the person you add could withdraw money, sell the property or asset, or take other actions without your permission. Even if you trust them today, in our experience, we know that unexpected conflicts can arise, or circumstances can change. There are better ways to plan that maintain control and the flexibility to change your mind about your wishes down the road.
5. Probate Avoidance Without the Risk
Most people add names to accounts to “avoid probate.” However, there are safer, more effective tools – such as Lady Bird deeds, transfer-on-death designations, or revocable living trusts – that can provide probate avoidance without creating unnecessary risks of making someone a legal co-owner now.
The Bottom Line
What looks like a simple solution can create complex and expensive consequences. Before adding anyone to your accounts or property, speak with a Florida elder law attorney. With the right planning tools, you can achieve your goals – whether it’s avoiding probate, protecting assets, or ensuring that a trusted advocate will be able to assist with your affairs if needed – without putting your financial security or assets at risk.
Protect Your Future with the Right Plan
At HKH Elder Law, we provide peace of mind and help our clients safeguard their assets while avoiding unnecessary risks. If you’re considering adding a loved one to your bank account, investment account, or real property, talk with us first. We’ll educate you about safer and smarter alternatives tailored to your goals.