A common estate planning goal is smooth administration of one’s affairs in incapacity and at death. People often create a joint bank account adding another person, typically a spouse or an adult child, so the other account holder can assist with bill paying and have uninterrupted access to the account for funeral and other expenses.
Make your intent clear: it can make a world of difference.
Joint bank accounts have two key attributes: (1) the owners have equal ownership and access to the account, and (2) the survivor automatically becomes sole owner of the funds upon the death of the other owner. Such survivorship facilitates transfer of the account without the need for probate. In many families, the arrangement is sensible, but beware of these drawbacks, particularly when the other joint owner is not the spouse:
∙ Each owner has the power to withdraw everything, meaning the account could be cleaned out without notice.
∙ The account can be exposed to each owner’s creditors, who can claim rights over the joint account.
∙ If you intend to leave your children an equal inheritance, remember that the joint account passes outside of your estate. Only the surviving owner is entitled to that account.
Consider Mary’s story: A widow, she adds her son, John, to her bank account. John assists Mary with bill paying, including prepaying for her funeral. At Mary’s death, the account holds proceeds from Mary’s condominium, sold well over a year ago. Mary’s bills and administrative expenses turn out to be modest. John and his wife resent Anne, his sister, for not doing enough to help Mary in her last year of life and believe that John deserves to keep all the money in the account. Anne insists that her mother intended her children to receive equal shares from the sale of the condominium. If they cannot resolve the issue, the siblings may be headed to court, with Anne having the burden of proving Mary’s intent to overcome the presumption of John’s survivorship of the account. Regardless of the outcome of the case, the siblings likely will not speak to each other again.
If you want the benefits of a joint account to facilitate your affairs, you should discuss the arrangement with your family to avoid misunderstanding. It is advisable to memorialize the purpose of the account, indicate whether the arrangement is for convenience only, and state its intended disposition by a signed writing, including whether the remaining fund is a gift to the surviving account holder. It would be prudent to have the joint owner acknowledge the writing in the presence of a witness and a notary, especially if the account holds or could potentially hold a lot of money. Make your intent clear: it can make a world of difference.
