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Why joint tenancy with your child is a bad idea

Having an estate plan is incredibly important, regardless of age, marital status or financial status. Everyone has assets that will one day be passed along. Joint tenancy is an estate plan option usually used by couples or business partners to obtain joint ownership and rights to assets. It also gives full ownership of those assets to the partner when one person in the joint tenancy passes away.

There are advantages and reasons for joint tenancy, but some may consider entering joint tenancy with their child to avoid certain aspects of the estate process later, such as probate. While this may be tempting to consider, this is not a wise decision for a number of reasons.

1. This requires mutual consent for anything you do with your assets.

By entering into joint tenancy on an estate plan, both parties are agreeing to joint ownership of assets. In order to make any decisions regarding assets, such as selling property, you would need to obtain your child's mutual consent about the matter first. Aside from the frequent joint decision-making, this is also very problematic if any personal issues or tension arise. Being a joint tenant with a child may prevent you from using assets as you would like or it could significantly slow the process of asset decisions.

2. Depending on circumstance, your bank account could be frozen when you pass away.

There are a couple reasons bank accounts could be frozen if you pass away with a joint tenancy. If you have debt when you pass away, probate court could freeze the account to prevent the survivor from liquidating your assets to avoid the debt. The bank account could also be frozen if court suspects that your child was only in the joint tenancy for convenience without actually contributing.

In either case, setting up a joint tenancy with your child can create huge issues regarding your bank account and assets after you pass on, and it could force your family into an even longer legal process of sorting out your estate.

3. The survivor may do anything they please with the assets.

Because ownership of your estate will pass to a joint tenant, which hypothetically in this case is your child, they have full ownership of the estate after you pass on. It may sound like an easy and quick alternative to distributing all of your assets via a living trust or will, but the reality is that these are still essential and important documents. They lay out how your estate and belongings should be used and distributed after you pass away. In a joint tenancy with your child, your assets may not be used the way you wished or originally intended after their ownership was passed on.

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