Shortcuts to avoid probate that can cost more than money
Perhaps because they do not understand the consequences, we have seen many people take “shortcuts” to avoid probate. Last column, we 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 resulted in a much greater cost to the family than if they had simply utilized the probate process.
However, financial cost is not the only risk when shortcuts are used. Unanticipated consequences from giving up control is an equally significant concern to us. In our prior example, the loss of control occurred when the parents put the house in the name of someone else.
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 you add your child to the account, you have given that child the authority to withdraw and spend that money. You have given someone else control over your money.
We realize that parents do not put a child on accounts if they don’t trust the child. Our 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 the complications of life. If those complications result in financial demands from the creditors or predators of your child, your account has likely become a resource available to pay those demands.
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.
Steve Wright is an attorney in Idaho Springs, Idaho.