The aging process brings about several unique challenges. Elderly individuals might find it difficult to pay their bills on time and manage their finances. Many elderly adults rely on their adult child or children to help them manage their financial affairs. It may seem convenient to add another party to their bank accounts and deeds. After all, the adult child is already helping their parents manage their financial accounts. Why not make the process easier by adding them directly to the account?
Your Adult Child May Need to Pay Gift Taxes
Adding someone to an existing bank account will count as a gift for taxes. If an adult adds a child as an owner of her bank account, the government can tax the amount of money in the account with a gift tax. You will need to notify the IRS of the gifting of the account, and your child may also need to pay gift taxes. Estate taxes can be significant and many adult children are unable to pay the estate taxes without selling some of their assets to cover the bill. It’s wise to speak to an estate planning attorney before adding someone other than your spouse to your bank account so they can explain all of the tax implications.
You Could Become Disqualified for MassHealth Benefits
If you or your spouse cannot afford to pay for nursing home costs, you may need to apply for Medicaid or MassHealth benefits. Adding your child to your assets could disqualify you from MassHealth benefits. You must prove that the value of your assets and income are below the required limit to qualify for MassHealth benefits. Assets that you give as a gift or transfer will count against your income limit when applying for long-term health care.
Your Estate Planning May Be Negatively Affected
When one of the owners of a bank account dies, the surviving owner will automatically own all of the assets in the bank account. A conflict could happen with your will. For example, if your will gives the assets in your bank account to your surviving spouse, but you’ve added your child’s name onto the bank account, your child will automatically receive all of the assets in your account upon your death. A family feud may arise.
If your child passes away before you do, the money in the bank account could become part of your child’s estate plan. Probate courts could distribute the assets in your bank account as part of your child’s will. In short, adding your child to your bank account can cause significant financial and legal headaches. Finally, if your child depends on Medicaid or any other type of public assistance, they may become ineligible for those services if they become a co-owner of your bank account.
Putting Another Person on the Deed of Your Home Can Be Dangerous
No matter how deeply you trust your adult child, there is always a risk when it comes to adding them to the deed of your home. There are cases in which adult children push their parents out of their own family homes. If your child is on your deed and they are not living at your home, they will need to pay significant capital gains when they sell the home after your death.
Contact Our Southeastern Massachusetts Elder Law Attorneys
If you are concerned about the transfer of your property after your death, our legal team can help you. There are better solutions to your estate planning needs than adding your child to your deed or bank account. Whether you create a will-based estate plan or a trust-based plan, we can help you ensure that your assets will go to your children after your death. Contact our estate planning lawyers today to schedule your initial consultation.