Adding Your Child To Your House, Car or Bank Account As Joint Owner Is Both Unnecesary And Dangerous

For as long as I have been advising clients on estate planning and estate administration, I have seen elderly people who have made one or more of their children a joint owner on their house, their car, their bank account, or all three.  The reason for doing it is almost always that the parent wants the child to inherit the house or the car, or wants the child to help with managing the parent’s finances.

For just as long, I have been telling people that making your child (or anyone else) a joint owner of any of your assets is risky.  The primary risk is that if the child has financial problems, the parent’s assets will be at risk.  As far as the child’s creditors are concerned, those assets are available to pay the child’s debts.

Another major risk of joint ownership is that the joint owner can appropriate the asset.  The most obvious way this can happen is that the child can withdraw money for his or her own purposes from the parent’s bank account.  If it’s a joint account, the bank isn’t going to be looking to see which of the joint owners is making withdrawals from the account.

The same risk exists with a jointly titled vehicle.  If the title names parent “or” child as the owner, the child can pledge the title as security for a loan, or even transfer the title to a third party, without the parent’s knowledge or consent.

I have even seen a situation where a child who was made joint owner of a house only for purposes of estate planning, and who had made no contribution whatsoever to the financing or maintenance of the house, sued her parent for partition.  Partition is a legal process that allows a joint owner of real estate to require a division of the property, or a sale of the property and division of the proceeds from the sale.  I don’t think a child under those circumstances should be able to get a partition, but I wouldn’t say it could never happen.  Just the fact that the child sued her parent for partition is enough to highlight the risk created by making the child a joint owner.

It may have been that in the past, there was no simple alternative to the use of joint ownership as an estate and financial planning tool. Now, however, there is a simple alternative. That alternative is a beneficiary designation in the form appropriate to the type of asset.

For a bank account, brokerage account, or mutual fund account, the beneficiary designation is called “POD” (pay on death) or “TOD” (transfer on death).  Adding a POD or TOD designation to an account means that if the owner dies, the account becomes the property of the beneficiary, without any formal transfer process.  All the beneficiary should have to do is present a certified death certificate to the financial institution.

For a titled vehicle, an owner can designate a beneficiary on the title.  This is done with a form provided by the state licensing agency.  The process is essentially the same as with a POD or TOD account.

For a house or other real estate, the concept is the same, but the execution is a little different because it involves real property rather than personal property.  A beneficiary deed is the appropriate vehicle.  It’s signed by the property owner and recorded with the county recorder.  If the property owner dies (and still owns the property), an affidavit is recorded with a death certificate to document the transfer to the beneficiary.

There are other alternatives to joint ownership, in addition to those described above, that will provide a relatively uncomplicated transfer of ownership or control of an asset.  I usually recommend one of the methods above, which provide for a transfer at death without a change in the present ownership. Don’t use joint ownership unless there’s a specific reason for that particular method.

Hannah quote


NB Hannah

Nathan B. Hannah, attorney

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Nathan B. Hannah is a Shareholder in the Tucson office, and practices in the areas of estate planning and administration, real estate, and commercial transactions.  He is also a noted blogger, and you can find more of his articles on his private blog,

Contact Attorney Hannah:  or  520/ 322-5000

This communication is designed to bring legal developments of interest to the attention of our clients and others. It should not be relied upon as a substitute for specific legal advice in a particular matter. For further information on any of the subjects discussed, or for legal advice in connection with any particular matter, please contact us.