Guest Article by Kellen Bryant, P.L.

A lot of times, I get questioned: “Can’t I just add someone to my deed and bank account to achieve this?” “Isn’t a will just a form where you fill in the blanks?  Or my favorite: “Can’t I do this myself?”   The answer is you don’t know what you don’t know and there is more to estate planning than avoiding probate.

In my world as an estate planning and elder law attorney in Jacksonville, Florida, I see and hear all the horror stories that people just don’t think about when they add names to deeds and bank accounts.  Based on the example above of adding your child’s name to your bank account and house, here are the 26 costly mistakes from DIY estate planning.

  1. Your son gets in a car accident and the plaintiff wants more than the policy limits of your son’s auto insurance.  Result: the plaintiff can garnish your bank account you have with your son.  It is his asset now.
  2. You and your son get into a car accident and you are both incapacitated. Result: your son’s power of attorney (likely his wife) has access to your checking account.   It is your son’s asset.  Additional penalty: you may need a guardian to manage your medical decisions, monthly income and expenses, and your remaining assets.
  3. You and your son become estranged.  Result: you cannot sell your house without his signature because he has an interest in your house that you can only get back via his signature.
  4. You have substantial wealth.  Result: the IRS comes after you for a gift tax audit because the addition of your son on the account and house is a gift and a gift tax return must be filed for gifts over $13,000.
  5. You die and have substantial wealth.  Result: your son has to pay the government estate taxes, which taxes money that you already paid income tax for.
  6. Your son dies and you don’t change anything before you die. Results: depending on the deed’s language, your son’s spouse or children get his share of the house; and your bank account and IRA do not avoid probate because there is no beneficiary or joint owner and as a result of not having a will, the assets can be distributed to estranged family members, go unclaimed, or be split among many family members.
  7. You die and your son wants to sell your house because he has his own.  Result: your son’s income tax liability will be the gain on his share of the house from the date of your purchase to the date of the sale.
  8. You want to change what you have done with the deed.  Result: your son will have to sign off on a new deed to change it to another person and eliminate his share in the home.
  9. You son files for bankruptcy.  Result: your bank account could become part of the bankruptcy and sold for creditors.
  10. You die and your son liquidated your entire IRA.  Result: the entire IRA will likely be taxed at your son’s income tax rate, which may be a lot higher than your tax rate during your retirement.
  11. Your assets are exposed to nursing home costs.  Result: nursing home monthly fees are extremely expensive in Jacksonville, Florida – some of your assets may have to be spent down.
  12. You die, your son buys jewelry for his wife… then gets a divorce a few years later. Result: the son’s former wife will likely keep the jewelry.
  13. You die, your son renovated his house with your IRA money (the one that got the tax hit remember?)… then gets a divorce a few years later.  Result: the equity in the house gets split and given to your son’s ex-wife barring an attorney fee intensive divorce battle.
  14. You die, your son’s wife spends some of their money renovating your house… then they get divorced.  Result: the ex-wife could claim that her money went into your house and she should get a cut.
  15. You die and you are married.  Result: your spouse can sue your son for his spousal elective share and homestead rights to your home to become a co-owner of the home with your son. WHAT?!?
  16. You die, you are married and your surviving spouse remarries.  Result:  the surviving spouse can give your property and accounts to his new spouse.
  17. The paralegal you hired on the cheap drafted the deed incorrectly and you die.  Result:  a lawsuit will likely be needed to correct the drafting error.  Good luck finding that person to sue for malpractice which your family will never collect on.
  18. The IRA custodian never recorded your beneficiary designation and then you die.  Result: a probate of the IRA will be required or your existing beneficiary gets the account.  What if that beneficiary was an ex-spouse?
  19. Instead of having your child on these accounts, you have your spouse on there and you all have an infant, and then you pass away.  Result: child gets everything to spend how they please at the wise old age of 18 and the two families must determine who will raise the child until then.  In case of a dispute, the judge will have to decide who is in the infant’s best interest to raise him.
  20. You have another son and you may be in your fragile years.  Result:  the other son claims elder financial abuse against the son added to the accounts and the deed, files a criminal complaint and for guardianship to make financial and medical decisions for you.
  21. You have memory defects and someone takes you in to change IRA and bank account information.  Result: the accounts can get changed even if you are mentally incapacitated, it is your money and the banker or the internet may not be able to tell whether or not you have a 10 minute short term memory.  Don’t worry, your son may be able to get some of the money back through a lawsuit.
  22. Your son is selfish after you pass.  Result: when holding these accounts and the property, it is the co-owner’s property and they do not have to share with anyone, including other siblings.  There is no legal requirement to share.
  23. Your son is secretive after you pass.  Result: the other children can file a lawsuit requiring disclosure of the financials.  Whether they have grounds to do so is another story… but one that requires attorneys fees.
  24. Your son has addiction issues.  Result: your son can pull all the money out of the account and can try to sell or mortgage his share of the house (or hold your IRA ransom over that threat).
  25. You die and your son has addiction issues.  Result: the money is spent on the son’s addictions and the house becomes neglected and ruined.
  26. There is a mortgage on the house, you die and your son has financial problems.  Result: the money is spent paying off your son’s creditors and your house gets foreclosed on or sold at a tax deed sale.

You see, do it yourself planning cannot prevent 26 costly or stressful errors from occurring.  This post was actually easy to write because I have seen these things happen in my estate planning practice in Jacksonville or have been asked these questions.  Visit my estate planning video page or call to sign up for an educational workshop to learn more about how estate planning attorneys can prevent these errors.

Kellen Bryant is the founder of Law Office of R. Kellen Bryant, P.L. and a Jacksonville, Florida native. Kellen focuses his law practice on estate planning and elder law with a particular focus on asset protection and preservation from long term care costs, creditors, and predators. Kellen works with families with special needs adults and children, small business owners, newlyweds, octogenarians and their respective parents and children in between.