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If mom or dad is getting a little older, and needs a little help paying bills and managing their affairs, be careful before you let them add you to their accounts.

It might seem like an easy and effective solution to just have your name and/or a sibling’s name added to their banking and investment accounts. After all, that solves two problems — it allows you, as a joint owner, to help manage the account — and when your parents pass on, it allows you to inherit the account without having to go through probate.

Sounds like a win-win, right? It isn’t … according to this Forbes article, it can end up doing quite a bit more harm than good. Here are just three important reasons why:

  • Gift taxes — adding your name is legally a gift of partial ownership from them to you, and could trigger gift tax
  • Estate implications — many jointly-owned assets completely bypass a Will at death, which means the original intention (for example, to split assets equally among siblings) could be circumvented
  • Capital gains taxes — the article doesn’t address this issue, but if the account is an investment, this is quite common. Capital assets qualify for a “step-up” in basis at death, which means they often can be sold with no tax consequences. However, if the account is owned jointly, all assets may not qualify for the step-up and therefore, capital gains taxes could be due when sold.

There are better ways to help mom and dad manage their affairs and avoid probate, and having a Personal CFO can help you make the best decision based on your unique family situation.