Did you know that how you own financial accounts during your lifetime is a critically important piece of your overall estate plan?
Did you know that how you own financial accounts during your lifetime is a critically important piece of your overall estate plan? Many seniors make the mistake of adding an adult child as a joint owner on their bank account because they believe it is the only way for that child to access the account to write checks and otherwise manage their assets. While this may seem like a convenient solution at the time, doing so may risk exposing your estate plan to unintended consequences after your passing.
It’s a common story: After a recent health scare, Mom moves into an assisted living apartment and realizes she needs help writing checks to pay her bills and otherwise manage her finances. Dad used to manage the finances, but he passed away a few years ago. So Mom enlists the help of Daughter, who lives across town. Mom’s other three children are scattered across the country and cannot help her with day-to-day financial tasks. Daughter picks up Mom to run errands and they head to the bank. After a brief conversation with a bank representative, Mom adds Daughter as a joint owner on her checking account so Daughter can write checks for her and “take care of everything else.” Mom goes back to her apartment, relieved that she no longer needs to worry about managing her routine financial affairs.
Daughter handles Mom’s finances for the remaining years of her life. Upon Mom’s death, the other children are surprised to learn that Daughter, as the sole surviving owner of the joint bank account, is legally entitled to the funds in the account. Mom had no other assets, as everything was sold when she moved into assisted living.
Even though Mom’s Will stated everything was to be split among her four children equally, her Will does not legally control the ownership of the joint bank account with Daughter. Mom’s Will only applies to assets she owned in her own name, without a joint owner or named beneficiary.
Daughter is now unsure if she should keep the money left in the bank account, or if she should write checks to each of her siblings to keep peace in the family. One of her brothers, who is always short on cash, keeps calling her about “his share” of the inheritance. This agitates Daughter, as she thinks about the hundreds of hours she spent caring for Mom, how difficult it was to watch her health decline, and how much she misses seeing her almost every day. Maybe she should just keep the money. After all, she has no legal obligation to share it with her siblings.
It does not matter if the joint account balance was $5,000 or $500,000. Either scenario can cause unnecessary confusion and animosity among the surviving children.
In many cases, the best solution for Mom would have been to keep the bank account in just her name, but give Daughter access to the account by signing a financial power of attorney naming Daughter as her financial agent. Daughter could have transacted business on Mom’s behalf, including signing checks, selling property, filing taxes, and taking virtually any other action in Mom’s name. Upon Mom’s passing, the remaining funds would have been split equally among the children according to Mom’s Will. Or Mom could have added all four children as beneficiaries on the account.
An estate planning attorney’s job is to help clients develop a comprehensive plan to leave their assets to their loved ones when and how they choose. Ensuring that a client’s ownership of assets is in harmony with their existing estate plan is just one small, yet very important, aspect of that job.
This article does not constitute legal advice. Each individual should consult his or her own attorney.