Minnesota Probate Lawyer Discusses the Issues with Simply Adding A Child to Your Bank Account
If I had a dime…
Why don’t I just add my adult child to my bank account? She helps me with all my bills anyway? This questions has the honor of being the one I am asked the most. This post will discuss some of the concerns raised by handling your estate this way.
When deciding who will inherit your assets after you die, it is important to consider that you might outlive the beneficiary you choose. If you have added someone to your financial accounts to ensure that he or she receives this asset after you die, you might be concerned about what will happen should you outlive this person.
What happens to a joint asset in this situation depends upon the specific circumstances. For example, if a co-owner that was meant to inherit dies first, the account will automatically become the property of the other co-owners and will not be included in the decedent’s estate. However, whether it is somehow included in this person’s taxable estate, and is therefore subject to state death tax, also depends on state law. Assuming the other co-owners were the only ones to contribute to this account, and that the decedent did not put any of his or her money into the account, there may be state laws that provide that these funds are not taxed. The other co-owners might have to sign an affidavit to that effect and submit it to the state department of revenue with the tax return.
And if the adult child encounters money problems, a creditor could attach a lien to the bank account and reduce the amount you have saved for your peace of mind.
Also, if the decedent’s estate was large enough to require the filing of a federal estate tax return the same thing may be needed in order to exclude this money from his or her taxable estate. You would generally state that this person’s name was placed on the account for convenience, and that the money was contributed by the other co-owners.
If you are considering adding someone to your financial accounts so that they inherit it when you die, you should contact an experienced estate planning attorney to discuss your options.