Episode 90: Why You Shouldn't Add Your Child to Your Deed or Bank Account
Episode 90
Host: Jill Mastroianni
Why You Shouldn't Add Your Child to Your Deed or Bank Account
Should you add your child to your deed or bank account?
It sounds like a simple way to avoid probate or make things easier if you need help later in life. But that estate planning shortcut can create risks you never intended, from exposing your home to your child's creditors to accidentally changing how your estate is distributed.
In this episode, estate planning attorney Jill Mastroianni explains why the first question should never be, "What's the solution?" Instead, it should be, "What problem are you actually trying to solve?" Once you know the problem, you can choose the right estate planning tool.
What You’ll Learn in This Episode
· Why adding your child to your deed or bank account can create unintended legal and financial risks
· The one question you should ask before making any estate planning decision
· When avoiding probate actually makes sense, and when it doesn't
· How revocable trusts help avoid probate while also planning for incapacity
· The advantages and limitations of ladybird or transfer-on-death (TOD) deeds in estate planning
· Why naming multiple TOD beneficiaries can produce surprising results
· How payable-on-death (POD) and transfer-on-death (TOD) bank account designations work
· Why your estate may still need liquid assets even if you've mostly avoided probate
· How financial powers of attorney differ from joint ownership in estate planning
· Why healthcare powers of attorney and advance directives are essential parts of a complete estate plan
Resources & Links
Watch this episode on YouTube: https://youtu.be/3tlGkQk1Sac
Episode 19: Why You Need (or Don’t Need) a Trust: https://www.deathreadiness.com/podcast/episode-19-how-to-know-if-you-need-a-trust
Episode 36: When Transfer-on-Death Deeds Promise to Avoid Probate but Create Chaos: https://www.deathreadiness.com/podcast/when-transferondeath-deeds-promise-to-avoid-probate-but-create-chaos
Episode 68: Why Good Powers of Attorney Still Fail: https://www.deathreadiness.com/podcast/68
State-specific healthcare powers of attorney: https://www.caringinfo.org/planning/advance-directives/by-state/
Tennessee estate planning: https://www.deathreadiness.com/estate-planning-solution
Connect with Jill:
Website: DeathReadiness.com
Email: jill@deathreadiness.com
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Before you add your child's name to your house or bank account, ask yourself one question: Would I be okay if I lost this house? Would I be okay if I lost every dollar in this bank account? If the answer is no, this episode is for you. We'll talk about why joint ownership isn't the shortcut many people think it is, and the legal tools that often accomplish the same goals with far fewer risks.
Welcome to The Death Readiness Podcast. This is not your dad’s estate planning podcast. I’m Jill Mastroianni — estate planning attorney, death readiness guide, and your translator for wills, trusts, probate, and the conversations most families avoid. If you’ve been wondering things like, ‘Can a trust protect what I leave to my children?’ ‘What happens if I give someone power of attorney over me?’ and ‘How can I help my parents while respecting their independence?’ You’re in the right place.
We're all looking for shortcuts, and I understand that. During my first year of practicing law, I was so overwhelmed that I convinced myself I didn't have time to get my hair cut. So I stood in my bathroom, pulled my hair into a ponytail, grabbed a pair of household scissors, and cut it off.
It did not go well. The funny thing is, my hair was never really the problem.
The problem was everything else. I'd just started practicing law. My mom had died. I'd bought my first house, which needed more work than I realized. And I'd adopted a very large, very ornery rescue dog named Oliver. Life felt out of control. Cutting off my ponytail was one thing I thought I could fix.
The haircut removed a lot of hair, but it didn't solve a single problem. In fact, it created a brand-new one. Before, my hair wasn't bothering anyone but me. Afterward, I urgently needed a professional hairstylist. When we're overwhelmed, we're often drawn to the quickest solution, not necessarily the right one.
And that's exactly what I see in estate planning. People tell me all the time, “I just added my son to the deed,” or, “I put my daughter on my bank account.” They tell me their solution.
But I prefer to start with the problem. What problem are you actually trying to solve? And once we understand the problem you're trying to solve, we can figure out whether adding your child to your deed or bank account is really the best solution, or whether there's a better tool for the job.
Different problems have different answers. Do you need help paying bills? Are you trying to avoid probate? Are you worried about incapacity? Do you simply want your child to inherit the house when you're gone? Those are all legitimate problems. And once we identify the problem, we can choose the right tool to solve it. But if we reach for the wrong tool, we may solve one problem and create five more.
So let's flip the question. If you add your child to your deed or your bank account... What if they get divorced? What if they're sued? What if they die before you do? What if they run into financial trouble? What if your other children later believe you intended that account or house to be a lifetime gift that counts against their inheritance? Those aren't far-fetched questions. They're things estate planning attorneys deal with every day.
Let's start with one of the biggest risks: creditors.
Imagine you add your daughter's name to the deed to your home because someone told you it would avoid probate. A few years later, she gets divorced. Depending on your state's laws and the facts of the situation, you've now created a conversation you never wanted to have—whether your home has become part of a divorce proceeding. Or maybe your daughter is involved in a serious car accident and is sued. Now your home could become part of that conversation, too.
And bank accounts can be even riskier. If someone is a joint owner on your account, they generally don't just have the ability to help you pay bills. They have the ability to withdraw 100% of the money.
So before you add someone's name to your deed or your bank account, ask yourself one simple question: Would I be comfortable if I lost this house? Would I be comfortable if every dollar in this account disappeared?
Now, if you're thinking, "My child would never do that,” you’re probably right. But this really isn't about whether your child is trustworthy. It's about recognizing that life happens.
I'm 44. I've already lost a parent, and some of my friends have, too. For those of us whose parents are still living, we often want them to believe everything is fine. We send pictures of family vacations, birthday parties, and smiling grandkids. We don't want them worrying about us anymore. They've done enough of that.
But in real life, beyond what is curated for our parents and social media, people get divorced, become disabled, struggle with addiction, and make financial mistakes. Good people find themselves in incredibly difficult situations every single day. None of that makes someone a bad son or a bad daughter. It simply means that co-owning your home or life savings may expose both of you to risks that never needed to exist in the first place.
So...are there better options? Absolutely. Let’s work through those goals one at a time, because each one has a different solution. Estate planning works best when we match the right tool to the problem we're actually trying to solve.
Now, I'm not here to tell you what you have to do. My goal today is to give you information, explain the tradeoffs, and let you decide what's right for your family.
In fact, if you're in Tennessee and you come to me for estate planning, that's exactly how our conversation starts. Not with, "You need a trust," or, "You should add your daughter to the deed." It starts with a different question: What problem are you trying to solve? Because once we understand the problem, we can choose the right tool together. You can learn more at deathreadiness.com/solutions. That’s deathreadiness.com/solutions.
Let's start with probate, because that's probably the reason I hear most often for adding an adult child to a deed or bank account. Whenever someone tells me they want to avoid probate, my first question is always the same: Why? And that’s not because avoiding probate is a bad goal. Sometimes it's a very good goal. I ask because I want to make sure we're solving their problem, not their neighbor's problem.
I've met plenty of people who tell me they absolutely need to avoid probate. Then I ask why, and the answer is, "Well...my neighbor said probate is terrible." Before we decide whether probate is something worth avoiding, we need to understand what it actually is.
Probate is simply the court-supervised process of transferring certain assets, called probate assets, after someone dies. Probate assets don’t include everything you own. They generally include assets that are titled in your individual name and don't already have a beneficiary designation, payable on death or transfer-on-death designation.
For example, if I have a bank account in my individual name and I don't name a payable-on-death beneficiary, that account is a probate asset and will pass through probate under the terms of my Will, or, if I don’t have a Will, under my state’s laws of intestate succession. If I do name a payable-on-death beneficiary, and that beneficiary survives me, it bypasses probate altogether.
Whether avoiding probate should be a priority depends a lot on where you live. Some states have probate systems that are relatively straightforward. Others are expensive, slow, or both. Here are a few situations where avoiding probate can make a lot of sense.
The first is if you own real estate in more than one state. For example, I'm currently working with a Tennessee client who recently purchased a home in Arizona. If she died owning that Arizona property in her individual name, her family would need to open a probate in Tennessee and a second probate in Arizona. That second probate in Arizona is called ancillary probate. Instead, we transferred the Arizona property into a revocable trust so her family can avoid that second probate entirely.
Another reason to avoid probate is for privacy purposes. Probate is a public court proceeding. Once your Will is admitted to probate, it becomes part of the public record. Anyone can see who inherited under your Will and who was named to serve as executor. That may not bother you at all. It doesn’t bother me. My estate will pass through probate. But if you have a blended family, strained relationships, or simply value privacy, a revocable trust can keep those details out of the public record.
A third reason to avoid probate is to avoid delay in administering your estate. In some states it can take months just to get an initial probate hearing. That means your family may have to wait before they can access assets or move forward with administering your estate.
And finally, probate can be very expensive. Some states calculate probate fees based on the value of the probate estate rather than simply charging filing fees and hourly attorney's fees. When that's the case, avoiding probate can make a lot of sense.
So, if you're trying to avoid probate, make sure you're doing it because it actually solves a problem you have, not because someone told you probate is always bad.
How do you avoid probate? One of the most comprehensive ways to avoid probate is with a revocable trust. A revocable trust can own your home, your bank accounts, and many of your other assets. Because those assets are owned by the trust rather than by you, individually, they don't have to pass through probate when you die. As an added benefit, if you become incapacitated, your successor trustee can step in and manage those trust assets without the need for a conservatorship or guardianship.
I'm not going to do a deep dive into revocable trusts today because I've already dedicated an entire episode to them. If you'd like to learn more about how they work, I'll link to Episode 19, Why You Need (or Don't Need) a Trust, in the show notes.
Now, there are other ways to avoid probate too. For real estate, some states allow what's called a transfer-on-death deed, sometimes referred to as a Lady Bird deed. If you've ever named a beneficiary on a life insurance policy or retirement account, the concept is very similar. Instead of naming who receives your money, you're naming who receives your home. You remain the owner during your lifetime, and when you die, the property passes directly to the beneficiary you've named, often without probate.
That sounds like the perfect solution. And in some situations, it can be. But it's important to remember that a transfer-on-death deed is a tool—not an estate plan. Every tool has strengths and limitations.
For example, what happens if your beneficiary dies before you? What if you've named multiple beneficiaries and one of them doesn't survive you? What if the deed wasn't prepared correctly? What about homeowners’ insurance? And after your children inherit the property, who decides whether to sell it? Who pays the expenses? What if one child wants to keep it and another wants cash?
I spoke about all of those issues in detail with Minnesota estate planning attorney Jen Gumbel in an earlier episode. If you're interested in transfer-on-death deeds, I'll link to it in the show notes.
Bank accounts are a little different. Unlike a house, a bank account doesn't create long-term management problems. You're not asking your children to co-own a vacation home or decide who pays the property taxes. Money is easy to divide.
And if your goal is simply to keep a bank account out of probate, you don't have to make your child a joint owner. Most banks allow you to name a transfer-on-death, or TOD, beneficiary instead. You remain the sole owner of the account during your lifetime, and when you die, whatever is left passes directly to the beneficiary you've named, generally without probate.
That can be a great solution. But like every estate planning tool, it works best when you understand its limitations. One of the biggest issues I see is naming multiple beneficiaries. Let's say I have two sons, David and Daniel, and I name each of them to receive half of my bank account. If they both survive me, that's easy. But life isn't always that simple.
Suppose David dies before I do, and I never update the beneficiary designation. What happens to David's share? Well...it depends. Some beneficiary forms let you check a box that says “per stirpes.” That's legal shorthand for saying David's share should pass to his children instead.
That may be exactly what you want. But if David's children are seven and nine years old, you probably weren't hoping a bank account would pass directly to two minors. And what if you didn't choose the per stirpes option?
So now we have two different sets of instructions working together. Daniel already received his own 50% through the transfer-on-death designation. David's 50% then passes into probate, where my Will says everything should be divided equally between my living child, Daniel, and David's children standing in David's place. In other words, Daniel receives his original half plus half of David's half, while David's children receive the other half of David's share, typically in trust if they're minors.
And that’s probably not what you intended. Most people assume a transfer-on-death designation completely controls what happens to that account. They don't realize that if one beneficiary dies first, the beneficiary designation and the Will may end up working together to produce a result they never expected.
That's one of the reasons I'm generally hesitant to name multiple transfer-on-death beneficiaries unless there's a specific reason to do so. For a married couple whose primary goal is simply to make sure everything passes to the surviving spouse, I usually prefer naming the spouse as the sole transfer-on-death beneficiary. It's simple, it's predictable, and it avoids a lot of unintended consequences.
There's one more thing I want you to think about. Sometimes people become so focused on avoiding probate that they accidentally create a different problem. Imagine every bank account you own passes automatically to someone else through a transfer-on-death designation.
Unless everything works perfectly and you were super organized, you probably still have a probate estate. Is there any money left to pay the expenses of the probate estate administration? Court costs. Attorney's fees. Creditor claims. Probate isn't free. Your executor need cash to administer your estate. So before you put transfer-on-death designations on every account you own, make sure you've thought about where those probate expenses will be paid from.
Now, maybe you're listening to this and thinking, “Okay, but what if I'm not trying to avoid probate? What if I'm worried about becoming incapacitated? What if I just need someone to help me pay my bills?” That's a completely different situation. If your goal is to make sure someone can step in and help you manage your finances if you're sick, injured, or experiencing cognitive decline, the answer usually isn't to add your child as a joint owner on your bank account.
A financial power of attorney is designed for exactly that purpose. It allows you to appoint someone you trust to handle financial matters on your behalf while the money remains yours. They can pay bills, work with your bank, manage investments, and take care of your finances without becoming a co-owner of your assets.
But, signing a power of attorney isn't always the end of the story. Banks and other financial institutions can still create roadblocks, even when the document is perfectly valid. In a previous episode, I shared the story of a daughter who was an agent under her mother’s valid power of attorney but still struggled to get a bank to honor it, along with practical steps you can take to make your documents much more likely to work when your family actually needs them. If you'd like a deeper dive into financial powers of attorney, why they sometimes fail in the real world, and what you can do about it, I'll link to that episode in the show notes.
A revocable trust is often a better solution. Rather than relying on someone else to act under a power of attorney, assets that are titled in the name of your trust can continue to be managed by your successor trustee if you become incapacitated. As an added benefit, those assets also avoid probate when you die.
You'll also want a healthcare power of attorney so someone can make medical decisions if you're unable to speak for yourself, along with an advance directive or living will so your wishes about end-of-life care are documented. Every state has its own versions of these healthcare documents, and many states make them available free of charge. I'll link to those resources in the show notes.
When I cut off my ponytail all those years ago, I wasn't solving the problem I had. I was solving the problem that I thought was easiest to solve. That's what we all do when we're overwhelmed. Estate planning can feel exactly the same way. Someone offers a shortcut. “Just add your daughter to the deed.” “Just put your son on the bank account.” It sounds simple and inexpensive. It sounds like it'll make everything easier. Sometimes it does.
But sometimes it solves one problem while creating three others. That's why I want you to remember one question from today's episode: What problem am I actually trying to solve? Because once you know the answer to that question, the right solution often becomes much clearer.
If the problem is probate, there are tools designed for that. If the problem is incapacity, there are tools designed for that. If the problem is helping someone pay your bills, there are tools designed for that. And if the problem is making sure your child inherits your home, there are tools designed for that too.
So the next time someone says, "Just add your child's name," don't start with the solution. Start with the problem. You might discover there's a better answer. And if today's episode raised questions about your own estate plan, that's a good thing. Questions are where good planning begins.
And if you're in Tennessee and today's episode made you realize you have questions about your own estate plan, I'd love to help. Every estate planning conversation in my practice begins the same way it began today, not with a recommendation for a trust or a deed, but with one simple question: What problem are you trying to solve? Because the right solution depends on the answer. You can email me at jill@deathreadiness.com. That’s jill@deathreadiness.com.
And if you’d like to go into more depth on some of the topics I mentioned briefly, check out the show notes for links to Episode 19 about revocable trusts, Episode 36 about transfer-on-death deeds and Episode 68 on financial powers of attorney.
Thanks for listening today.
This is Death Readiness, real, messy and yours to own. I’m Jill Mastroianni and I’m here to help you sort through it, especially when you don’t know where to start.
Hi, I'm April, Jill's daughter. Thanks for listening to The Death Readiness Podcast. While my mom is an attorney, she’s not your attorney. The Death Readiness Podcast is for educational and entertainment purposes only. It does not provide legal advice. For legal guidance tailored to your unique situation, consult with a licensed attorney in your state. To learn more about the services my mom offers, visit DeathReadiness.com.
