BANK ACCOUNTS AND JOINT OWNERSHIP

We often encounter single clients who have joint bank accounts with a child or a trusted friend. While these accounts are convenient and will avoid probate on death, we do not recommend them for the following reasons:

  1. Fraud. When an additional person is named as an owner on a joint account they have free access to that account and may treat the money as their own. Many older adults have found their accounts gutted by a child or a friend that they considered above reproach.
  2. Exposure to Legal Liability. If this person who has been named as an additional owner on an account runs into legal trouble the money in the account is considered their money for purposes of satisfying any lawsuit judgment.  This would include accident liability, creditor issues, divorce judgments and more.
  3. No Inheritances.  If the true owner of the account passes away all the money goes to the surviving joint owner. That is fine if it is what is intended. Often times however, the joint owner has promised to distribute the money to other heirs. Unfortunately that person has no obligation to distribute the funds and often does not honor that intent.

There are three steps every person can take to assure that they can avoid fraud and legal liability while assuring that their money goes to the persons  they want it to go to when they die:

  1. Remove the joint owner(s) from the account. They are not necessary if you merely need them to help you manage your finances and other business and aren’t providing them with a gift.
  2. Execute a Durable Financial Power of Attorney that allows the joint owner to fulfill those financial and business management functions you need them for. An effective Durable Power of Attorney will protect the maker from being financially exploited and protect against the problems discussed here.
  3. Complete beneficiary designations with the institutions holding the accounts to assure that those persons you wish to inherit the money will actually get it. These institutions typically have forms for you to fill out and sign. It is a fairly easy task that avoids the need to go through a probate proceeding in court to get the property distributed.

At Arizona Mobile Attorneys we can help you with these and other matters concerning estate planning and physical and mental capacity planning. Please contact us for more information