It has been my experience that many people find it convenient to have co-owned property. Often parents will co-own a vehicle with their minor child; or add your name to an elderly parent’s bank account; or put your name on a house title as a means of estate planning. There is always a good reason for making these kinds of ownership arrangements, but the legal problems that are created are often overlooked.
When there are two names on a title or bank account, it means that both parties own the property. The intention of the parties doesn’t matter. So, while this may make some things easier, it can make other things more difficult. One of those things is filing for bankruptcy. When a person files for bankruptcy, they are required to list all of their property. This includes property jointly held with another person. It also includes property that is jointly held simple for the sake of convenience.
A jointly owned car held for a minor child still must be disclosed in bankruptcy paperwork even if it is driven by that child. And, if the that child becomes an adult and the title isn’t changed, that child doesn’t legally own the property, the parent does.
The same is true for bank accounts and real estate. If a person files for bankruptcy and their name is on someone else’s bank account or deed, it is property that must be listed for bankruptcy purposes. The real issue arises if that property has equity or value. It then becomes property that taken or lost as part of a bankruptcy proceeding. At that point, any convenience that was realized is gone.
The good news is there are ways to title property and bank accounts that allow for the same conveniences without the actual transfer of ownership. Properly recorded beneficiary deeds, transfer on death designations and/or properly executed power of attorney documents can offer the same benefits as joint ownership without the drawbacks of actual ownership.