THE UNFORSEEN PROBLEMS OF UTILIZING JOINT ACCOUNTS AS ESTATE PLANNING TOOLS

Mostly for convenience, people wish to have another person have access to their bank account for convenience.  This is usually more common among the elderly, who wish to give access to their bank account to an adult child or trusted friend, thus enabling the other party to pay bills if the initial account holder becomes unable to do so.

At first glance, this scenario may seem simple and offer the advantage of not having to possibly go through a conservatorship or probate upon the incapacity or death of the initial owner.  However, establishing a joint bank account may also be a vehicle providing disadvantages that many people do not take into consideration.

There are a number of reasons why it may be inadvisable, even dangerous, to hold title jointly with an adult child or trusted friend.  The danger is due to the fact that joint ownership gives the added individual power - power to access the funds in that account.  

In addition, the initial owner of the account may lose the funds in the account to the creditors of the joint owner.  Even if the initial owner does not lose some or all of the money in the account, he or she may still have to go to court to prove the money actually belongs to him or her.

Finally, and most important, upon the death of the initial owner, the funds in the account may go directly to the added individual.  Specifically, if the account is held jointly with the right of survivorship, the funds in the account belong to the surviving owner.  Even if the initial owner designates in his or her will that the funds are to be given to another individual - be it another child or family member - the will cannot control the account because it automatically goes to the surviving owner.                                                                 

Even though people may be making arrangements, such as a joint bank account, “for convenience,” many do not take the above points into consideration.  As such, one should carefully consider all the repercussions of adding another person on title to a bank account, or any other property, for that matter, because there may be unforeseen consequences.

If you have questions about accounts and changing title, discuss them with your banker and/or attorney to ensure your objectives are understood and carried out.

Amy K. Nett, Esq., Managing Partner

Law Offices of Nett & Nett, PC

May 2022