Many people like to plan their estates by having two names on every asset. That way, when one owner dies, the asset automatically passes to the surviving owner, thus avoiding probate court.

Once a person is added as an owner to an asset, that ownership takes effect immediately, and all owners have equal claim to the asset. Because of this, it is critical to consider carefully who is being named as an additional owner to your assets.

Consider the following scenario: Mr. Smith is named an owner on his mother’s savings account and is currently involved in a divorce. Divorce proceedings require a full disclosure of financial assets. Because he is an owner, his mother’s savings account will be factored into the divorce. Even if Mr. Smith believes that the asset belongs to his mother, in the eyes of the law, he is an OWNER. Failure to disclose the asset can be considered fraud. Taking Mr. Smith’s name off of the asset right before he files for divorce can also be considered fraud. The asset must be disclosed and thus becomes part of the divorce proceeding. (The same result would occur if Mr. Smith were in bankruptcy.)

In addition, if a child and his parents have assets at the same bank (which is common), there is another danger if the child falls behind in repayment of any loans from that bank (car or boat loans, a home equity line, etc.). Loan documents almost always provide that the bank may use the money in other bank accounts to pay any past due loan payments. Some parents have had all of their bank accounts seized because a child who was a co-owner on their accounts had fallen behind on his loan payments.

Because of these and similar circumstances, consider adding a person as a beneficiary to your account rather than as an owner. This way, you maintain full control of your assets, but upon your death, the asset passes right to the beneficiary and avoids probate court.