Q: I'm planning to put my daughter's name on a lot of my accounts as well as the deed to my house. I see this as an easy, inexpensive way to provide for her upon my death, avoid probate and allow her to access my money should I become incapacitated or ill. This will accomplish the same thing as some fancy estate planning without the added cost of paying an attorney to prepare complicated documents. This is probably like asking the fox to guard the hen house since you are a lawyer, but do you see any problems with this approach?
I have my law degree, but I don't practice law. With that said, you may be making things worse with your approach than if you did nothing. A better way to make sure someone has access to your accounts, can help with health care, inherits as you wish and avoid probate is with good estate planning. A will, revocable living trust, and health care and financial powers of attorney can accomplish the same goals as joint ownership without the risks and possible adverse tax consequences.
When you add someone's name to your real estate, bank accounts and any other of your assets, you are giving up control of these assets. You are also setting yourself up for some unintended complications, which are listed below.
When you put a non-spouse as a joint owner on property or an account, in the eyes of the IRS, you have just gifted one-half of the value of the asset. If the value of all assets gifted to one person in one calendar year exceeds $13,000, you are required to file a Gift Tax Return. Failing to file puts you in violation of gift tax law. You've also lost the potential for a stepped-up income tax basis, which would be present for inherited property and other assets.
Once your daughter is added as a joint owner, she is half legal owner of the asset. There is no legal way to take the gift back. You may still think you own the property since it was yours and your motive was simply to provide access when needed, but that's not the law. What if your daughter and/or her family run into some financial difficulties and they need some money? It will be very tempting to "borrow" from the account. She may do this with the full intent to pay it back but then be unable to do so. What if she becomes involved in a lawsuit, has credit problems, owes child support or any other situation where others try to claim some or all of her assets? Once you add her name, she has equal rights to your money, as do her creditors.
You may think adding her name to your assets is an easy way to avoid probate and achieve other goals, but I wouldn't suggest this approach. My recommendation would be to hire an experienced and reputable estate planning attorney to help you accomplish your goals.
