The Hidden Dangers of Joint Ownership and Transfer-on-Death Accounts

 Posted on December 24, 2025 in Strategy and Asset Protection

Adding a child's name to your house deed or bank account seems like a simple way to avoid probate. Many people believe this small paperwork change will make things easier for their families. Unfortunately, this shortcut is one of the most common estate planning mistakes, and it can create serious financial and legal problems that take years to fix.

These quick fixes often override your actual wishes and expose your assets to risks you never considered. Our Aurora, IL estate planning attorney has 20 years of experience and can help you avoid mistakes like this. We start by making sure we truly understand your long-term goals, and then work backward to find great solutions.

How Do Joint Ownership and Transfer-on-Death Accounts Work?

When you add someone's name to a deed or bank account as a joint owner, you create what Illinois law calls a joint tenancy with right of survivorship. Under 765 ILCS 1005/1, this means that when one owner dies, the surviving owner immediately and automatically owns the entire asset. The same principle applies to transfer-on-death and payable-on-death account designations.

The critical point most people miss is that these arrangements always override your will or trust. It does not matter what your estate planning documents say. The moment you die, joint accounts and TOD designations transfer directly to the named person, completely bypassing your other instructions.

What Happens When Joint Ownership Overrides Your Will?

This problem hits blended families especially hard. Consider a father who writes a will leaving his estate equally to his three children from a prior marriage. After remarrying, he adds his new spouse to the deed of his home and his main investment account to make managing finances easier.

When he dies, his spouse immediately owns those assets outright. His will becomes irrelevant for that property and that account. His three children receive nothing from those assets, even though he clearly intended otherwise.

Unfortunately, disputes over inheritance are among the leading causes of family litigation. These court battles can drag on for months and cost tens of thousands of dollars in legal fees. The emotional damage to family relationships is often permanent.

Can Creditors Go After Joint Accounts You Share with Your Children?

Adding your child's name to your account does not just give your child future access. It gives them an immediate legal ownership interest right now. This means your assets become exposed to their financial problems.

Your account can become fair game if your adult child:

• Gets sued after a car accident

• Goes through a divorce

• Faces business debts

• Has creditors chasing them for any reason

This means creditors can pursue your money. Divorce courts can consider it marital property. A lawsuit judgment can place a lien on your jointly held real estate. You intended to give your child an inheritance, but instead, you may have handed your life savings over to their creditors.

Why Do Joint Accounts Create Unequal Inheritances?

Many parents add one child to their bank account for practical reasons. They want someone who can pay bills if they become hospitalized or need help managing finances. The problem is that this arrangement often creates an unequal distribution that the parent never intended.

When the parent dies, the child listed on the account legally owns all of that money immediately. They have no legal obligation to share it with their siblings, even if the parent's will says everything should be divided equally. This situation breeds resentment, accusations, and lawsuits among siblings.

There is another hidden danger as well. If that child later needs long-term care and applies for Medicaid, the joint account counts as their asset. They must spend it down before qualifying for assistance. If they try to give the money to siblings, Medicaid will impose penalty periods for improper asset transfers.

How Can You Transfer Property Without The Risks of Joint Ownership?

The safest way to avoid probate while protecting your wishes is through a properly funded revocable living trust. A trust allows you to maintain complete control of your assets while you are alive and healthy. It ensures your property goes exactly where you want it to go after you pass away.

Unlike joint ownership, a trust cannot be overridden by accidental beneficiary designations. It also protects your assets from your beneficiaries' creditors and prevents the need for guardianship court if you become incapacitated.

Call a Kendall County, IL Estate Planning Lawyer Today

Do not let a simple paperwork decision create lasting problems for your family. Our Aurora estate planning attorney at Gateville Law Firm has over 20 years of experience helping families protect their assets.

With advanced skills in real estate matters, we can guide you through property transfers the right way. Call Gateville Law Firm at 630-780-1034 to schedule a consultation and learn how a properly structured trust can give you peace of mind.