Follow Andrew Linkedin Twitter Facebook
Email Andrew Email
Legal Issues
May 3, 2017

Risky Business: Joint Bank Accounts As An Estate Planning Tool

Sponsored Content provided by Andrew Olsen - Elder Law Attorney, CSH Law

A popular idea among our aging population is to add a co-owner, often an adult child, to an elderly person’s bank account. The intended goal is for the co-owner to manage the elderly person’s finances upon illness or incapacity.
Elderly people also add co-owners to bank accounts to allow quick access to cash for funeral and other expenses upon death. 
 
Elderly people express the belief that the jointly owned bank account will then pass into their estate at death to be divided according to their will. Or elderly people express a belief that the joint owner of the account knows to distribute the funds among heirs upon the elder’s death.
 
Unfortunately, that is not how joint accounts work.
 
A jointly owned bank account permits multiple co-owners to access the account without permission from the other co-owners. As joint owners, co-owners are entitled to any or all the funds in the account even without contributing to the fund balance. Making a person a joint owner of a person’s banking account will certainly assist with the ease and convenience of writing checks, making deposits and accessing cash. 
 
A jointly owned banking arrangement can work well, but consider the following risks:
 

  • . While co-owners of a jointly owned bank account want to trust each other, a co-owner can drain the account without permission from the other co-owners.   
  • Creditors may come after the bank account for any debt owed by anyone on the account. If a co-owner defaults on a loan that the other co-owner has nothing to do with, the creditor may come after the jointly owned account. There is also potential that in a divorce, a co-owner’s spouse could claim interest in a co-owner’s funds in a joint account.
  • Conflict among heirs. Generally, a co-owner of a joint account will legally inherit the money in the account upon the other co-owner’s death. Just because a parent expresses a desire for the co-owner to divide the account with other upon the parent’s death does not mean the co-owner is required to do so. The account co-owner is not legally obligated to share the funds with siblings or other beneficiaries of the estate. 
  • Bypass estate planning documents. Money in a jointly owned account will pass outside of a will.  This aspect cannot be changed by using a will because a joint title holder will almost always trump a will.
 
Access to a parent’s bank account can easily be accomplished without these risks by executing a durable power of attorney or creating a trust. In a durable power of attorney, a trustworthy person is named the “attorney-in-fact.”
 
When it comes to financial transactions, an attorney-in-fact is free to spend money with two very important restrictions:
  • The funds must be used only for the benefit of the principle
  • Upon the principle’s death, the money is part of the principle’s estate to be distributed according to the owner’s will or trust; it doesn’t go to the person named as attorney-in-fact.
 
With this document, a person will have complete and full access to bank accounts or other financial matters, but not ownership. 
 
A trust will resolve the same goals. A parent may remain a trustee of a trust until incapacity or death at which time another person takes over as trustee. This allows for a seamless transition whereby the successor trustee has the ability to handle a parent’s financial needs and manage any assets within the trust. If the parent recovers from incapacity, the parent will again become the trustee over the trust. If not, the successor trustee takes over after death.

Andrew Olsen is an attorney in the CSH Law Elder Law Practice Group in Wilmington, NC, where he practices in the areas of elder law, estate planning probate, guardianship, alternative dispute resolution, estate and trust litigation, special needs planning and veteran’s benefits. To contact Olsen, call (910) 777-5733 or email him at [email protected].
 

Ico insights

INSIGHTS

SPONSORS' CONTENT
Aaeaaqaaaaaaaaidaaaajdhiztrkodm0lte2yjetngrkmy1hotrmltawmdvlmwqyztmymw

Building A Health Care Innovation Certificate: It’s A Team Effort

Diane Durance - UNCW Center for Innovation and Entrepreneurship
Carolinemontgomery4

New Dec 2020 Government Stimulus and Programs

Caroline Montgomery - Adam Shay CPA, PLLC
Andybasingerliveoakprivatewealth headshot

Financial Planning Through The Lens Of A Navy SEAL

Andy Basinger - Live Oak Private Wealth

Trending News

Builder's 10-year Plan Includes Up To 5,000 Homes In Southern Pender

Cece Nunn - Jan 19, 2021

Cameron Art Museum Welcomes New Board Members, Appoints Officers

Christina Haley O'Neal - Jan 19, 2021

Blue Mind Coworking Opening In Wilmington

Johanna Cano - Jan 20, 2021

The Hop Yard Opens Downtown Wilmington Location

Jessica Maurer - Jan 20, 2021

Healthy James Franchise Coming To The Port City

Jessica Maurer - Jan 20, 2021

In The Current Issue

Predictions Mixed For Real Estate

Residential and commercial real estate in the Wilmington area is expected to thrive in certain areas and struggle in others this year....


Programs Aim To Build Workforce

The construction and IT sectors are the focus of new collab­oratives forming this year to address the area’s workforce develop­ment needs....


Bike Shop Owner Rides To Success

Since she left the corporate world less than 10 years ago, Diane Hodapp has been on a roll....

Book On Business

The 2020 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

2020 Health Care Heroes
2020 WilmingtonBiz 100