Avoid Condominium Headaches Bradenton Herald
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Parents often regret adding adult children to bank and brokerage accounts. Ensuring continuity with banks and financial services companies in the event of illness and disability is often risky. What is convenient at the start can cause significant problems in the background.
Take 75-year-old Veronica, for example. She plans to add her 57-year-old daughter, Mary Beth, to a $ 125,000 bank account.
“Are you sure this is a good idea, Veronica?” I ask.
“No problem,” she said. “I trust Mary Beth.”
“But what happens when you die? ”
“Mary Beth will distribute equally to my two other children, Richard and Jane,” she replies.
Now I have to walk gently. I don’t want Veronica to make a big financial mistake and, to be frank, rub her the wrong way and motivate her to change her financial advisor.
So here’s what I’m like, “That’s a terrible idea, Veronica, because Mary Beth doesn’t legally have to share these funds with her siblings upon death.” Despite the risk of irritating Veronica, I do the right thing and speak up:
“Maybe a better strategy is to provide Mary Beth with a proxy form,” I said. “It allows your daughter to do business for you, subject to careful parameters. However, a form of proxy ends on death.
There are other risks to consider. Most states estimate that the funds in the account are joint and held at fifty-fifty. Legally, a child can withdraw funds from the account 100% at their discretion.
Joint accounts have liability issues. A dispute can lead to the seizure of funds in an account. The money in the account could support claims when adult children divorce or have issues with creditors. Logically, if the funds in the account are available for your child, the funds may also be submitted to creditors and divorcing spouses.
I found most of the bank clerks to be good enough at opening accounts, but they are not lawyers. Also, avoid complacency when titling stocks and bonds. Despite your best intentions, some investment advisory firms can make mistakes when rushing to open a joint account. It is your responsibility to title your accounts in order to adequately protect your wishes.
For this scenario, a better strategy might allow a son or daughter with special authority to log into the checking account. A child can access the money to pay bills, but cannot use the funds for their own benefit. The child’s creditors usually do not have access to this money either.
Banks often prefer not to do this because they have difficulty with technology validating names on checks. Joint accounts are encouraged as they do not have to review signature cards or redundant technical checks.
Are you concerned with simplifying or avoiding homologation? A strategy of adding restrictions payable on death to the account resembles the concept of a life insurance beneficiary. The money can then go straight to your choice, and that’s not part of the judicial probate.
People often do crazy things when they go into business with an inappropriate partner. Years ago, a friend bought a house with an intrinsic “fiancé”. The goal was to buy the house, 50%, 50%
After my friend signed a purchase contract, his sweetheart said, “I won’t be able to do this financially because ‘I have bad credit‘.
Now my friend has gone ahead and bought the house individually. He ended up breaking up with his “sweetheart” and ended up with a property that was beyond what he could afford. He now regrets buying this house despite big intentions like “I’m in love and I’m moving forward to a more meaningful commitment.” ”
Partnerships are like being married. There are obviously good and bad marriages. As many of you probably know, avoiding a bad marriage is smart. Your chances of success are better if you buy an investment, rental property, or business one hundred percent, if you can afford it. Avoid the headaches of fighting over money and dealing with close friends and relatives. They can be a huge pain in the ass. Flying solo generally has fewer complications.
For example, fights can arise when pricing rents for a rental property. “I don’t want to shell out $ 10,000 for a new heating system because my family is running out of money,” says your college roommate, who defended your marriage. “Sorry, we have to do it by law,” you reply, hoping the county won’t condemn your “common” property.
In my experience, fortunes, friends, and attitudes change. A partner, maybe even a longtime friend, may lose their job, cash in on an ex-spouse, or struggle to afford school fees for three children. Relationships change; What about a vacation home that a party wants to personally use for three weeks in a season when it could be rented for $ 6,000 per month?
I think it’s often stupid for unmarried couples to buy property together. (Maybe married couples too) Don’t do it. But if you have to, create a substantial buy-sell agreement and a careful partnership or LLC operating agreements.
Jim Germer is CPA Bradenton and Financial Advisor at 3655 Cortez Road W, Suite 110, Bradenton Florida 34210. Call (941) 746-5600 or email [email protected]. Securities offered by Cetera Financial Specialists LLC (carrying on insurance business in California as CFGFS insurance agency) member of FINRA / SIPC. Advisory services offered by Cetera Investment Advisers LLC. Cetera entities are under separate ownership from any other named entity. This article is designed to provide accurate and authoritative information on the topics covered. However, it is not intended to provide specific legal, tax or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought. Neither Cetera nor its affiliates provide tax or legal services. Hypothetical situations are provided for guidance only and should not be taken as a representation of past or future results.