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
Atromitos micheallegady headshot

Recognizing Women-Owned Small Businesses

Michealle Gady - Atromitos
Ubs chadpearson headshotresized

The Three Dimensions Of Selling Your Business

Chad Pearson - UBS Decision Point Wealth Consulting
2022052 75 142344351

Bridge

Natalie English - Wilmington Chamber of Commerce

Trending News

Untappd Taps Out Of Downtown Wilmington Office Building

Cece Nunn - Jan 30, 2023

ILM To Chart Future Path In Forthcoming Report

Miriah Hamrick - Jan 30, 2023

In The Current Issue

Preserving Wealth, For Family And History

Plans for major improvements fell by the wayside, delayed by life and the home’s overwhelming degree of deterioration, which placed the prop...


Local, State Efforts Target Service Sector

Many industries have started to recover from the roiling effect the pandemic had on the labor market, but nearly three years after the first...


Facility Owner Puts His Chips On The Table

With more than 15 years of experience in the wood chip industry, Taner Basaga has maintained key relationships with loggers in the region. “...

Book On Business

The 2023 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

2022 Power Breakfast: Wilmington's Most Intriguing People - Spence Broadhurst & Hannah Gage
2022 Power Breakfast: Wilmington's Most Intriguing People - George Taylor
2022 Power Breakfast: Wilmington's Most Intriguing People - Mike Ford
2022 Power Breakfast: Wilmington's Most Intriguing People - Meaghan Dennison
2022 Power Breakfast: Wilmington's Most Intriguing People - Rhonda Bellamy