Protect your assets wisely

I know we love our kids. Some more than others and some just enough to try to get the gas turned on in the kids name. Well, even later on in life some people try to save on taxes by placing certain assets in their children's name. Especially the folks realizing that they are going to outlive their money.

Case in point. Retirees sometimes add their child’s name to their accounts in an effort to transfer ownership and remove assets from their estate. But doing so may cause problems later.

First, you aren’t realizing any tax savings by putting your child's name on a bank or brokerage account—i.e., registering it as joint tenants with rights of survivorship (JTWROS). JTWROS assets bypass the probate court process upon your death and go directly to the surviving joint tenant, so there will be fewer time delays and court costs.

However, the account will still be included in your estate. Moreover, adding your child’s name to your account could expose you to legal woes—and leave you without any money for retirement. Let’s say you’re getting older, and you aren’t able to manage your affairs well, so you add your adult child’s name to your bank and brokerage accounts. Your child can write checks on the accounts, and if you die, he or she will inherit the accounts, avoiding probate.

But there could be problems.

First, since assets registered as JTWROS are owned jointly during your lifetime, they thus can be accessed (and liquidated!) by your joint tenant while you are living. In other words, your child could potentially liquidate the account without your consent.

Perhaps more worrisome: If your child gets sued, you could lose all of your money. And don’t think you can change the title of the assets once legal proceedings begin—that’s called fraudulent conveyance, and it's a big legal no-no. There are look-back periods. Please proceed with caution.

A better option may be a durable power of attorney, which gives your child access to your accounts without placing the assets at risk.

Any other suggestions? I would love to hear from you. Have a good weekend.