Shouldn't I put my kids names on my checking account and other assets to avoid probate?

As a general rule we answer this question as a resounding "NO" for a number of reasons.  Our reasons are as follows:


  1. Putting a child's name on an account may constitute a gift causing many unintended consequences.

  2. Parents can lose control over the gifted asset, which means the child may abscond or take off with the money in the account.  Yes, this does happen.

  3. It is likely to be considered a gift and may in rare cases require the filing of a gift tax return.

  4. If the placement of the name on the account is intended to be a gift, the gifted amount is subject to the child's valid creditor claims.

  5. Placing the name of child on an account is likely to be considered a transfer for purposes of Medicaid eligibility.

  6. Placing the account in joint tenancy (this is usually the way banks establish such accounts) means upon the parent's death the account would pass to the joint owner child, which may or may not be consistent with the parent's goals.


If the primary reason for putting the child's name on the account is to help with the bill paying of the parent there are safer ways to do this.  First, the account could be titled in the name of a trust and the child named as a trustee, with authority to write checks.  The terms of the trust would outline ownership of the account as a trust asset and the trustee (child) would be subject to numerous laws regarding the use of the funds.


Second, if it is imperative such an account be established, have the amount in the account limited so the risk is reduced on the availabillity of the funds to the child or the child's creditors. The accounts with the limited funds can be set up to receive funds by automatic bill pay making the flow of funds very efficient.


Third, be clear with the bank where the account is established, the account is not to be held in joint tenancy and the child is acting in his or her fiduciary capacity as a agent under a power of attorney (which would need to be put in place prior to setting up the account). This should insure putting the name on the account is not considered a gift and may avoid many of the problems outlined above. It is not to say the child cannot abscond with the money, but if he or she does it will certainly make matters easier when the child must face the family or the court system if the funds disappear.

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