Perhaps because they do not understand the consequences, I have seen many people take “shortcuts” to avoid probate. Last column, I gave the example of parents who transfer their home to a child so that the home could be sold after the parents pass, without going through probate. That shortcut may actually cost more money than if they had simply used the probate process.
Financial cost is not the only risk when shortcuts are used. Shortcuts also mean giving up control of your assets and how they will be distributed. In fact, those shortcuts may cost you control over those assets while you are still alive. In my prior example, the loss of control occurred when the parents put the house in the name of someone else. I am aware of more than one situation in which that decision cost the parents far more than they anticipated.
Another common example is a parent who adds a child as a co-owner on bank accounts, investments and the like. The advantage is that the child can assist with paying bills, etc. and, upon the passing of the parent, can take over the account without probate.
For most, the trustworthiness of the child is the most obvious risk. If I add my child to the account, I have given that child the authority to withdraw and spend that money. I have given someone else control over my money.
I realize that parents do not put a child on accounts if they don’t trust the child. My response is that these problems arise more often than you realize.
However, there is another significant risk that is not so obvious. Even a trustworthy child is not immune from their own challenges. If those challenges include money problems, your child’s creditors may be able to come after your account to be paid back. Additionally, I have dealt with several cases in which, after the parent died, a fight about the bank account occurred between the child left on the account and the remaining children.
There are safer options which allow you to maintain control of your estate now, and after your passing. Do not let “shortcuts” jeopardize what you have spent a lifetime building.