Today, many Americans maintain joint bank accounts. Some do it for convenience, while others do it as a form of nontraditional estate planning. Historically, joint accounts have been full of challenges and dangers, and this continues to be a problem for many seniors. At the Elliott Frazier Law Firm, we can help families prepare plans that work. Don’t trust your life savings and your final estate plan to a single bank account. Talk to a lawyer today.
How a Joint Bank Account Works
Some people use a joint bank account as a sort of workaround to avoid probate and avoid making a will. Banks will usually allow you to designate who will be an account holder. If there are multiple account holders, the bank will provide a form that allows the account holders to designate one of the following options:
- Parties will own a share of the account in proportion to their own net contributions
- Pure joint tenancy, where all parties have full ownership of the funds
If the account is held where all parties own their own share, then when a single account holder dies, his or her share is to be distributed to his or her heirs. This is rare. More commonly, people select joint-tenancy with the right of survivorship. In this type of ownership, multiple parties own the money in full, and the last surviving owner gets the money.
Why Would People Use a Joint Account?
Many seniors are turning to joint accounts because according to South Carolina law, the funds never go through probate. This may seem appealing because at death, the money just stays put and the loved one gets to keep it with no additional paperwork and no courthouse.
Major Problems With Joint Accounts
Like any miracle fix, there are problems. You may think your loved one would never take your money, but tons of litigation around the country seems to suggest otherwise. By naming a loved one on your account, you are presumed to be giving them the money as an outright gift. That’s right. Unless there is clear evidence to the contrary, a court will generally uphold the loved one removing all of the money for personal use, even while you are still alive.
Likewise, after you pass away, other heirs and loved ones may feel jilted, because there is no offset for the funds that passed outside of the estate through a joint account. This joint account holder, if an heir, may still be entitled to the same share under state inheritance laws. Therefore, one heir could end up with a windfall that was unintended.
The Right Way to Use a Joint Account
There are times when a senior – especially with major health or cognitive issues – may wish to set up a bank account with a joint account holder for convenience purposes only. With the proper estate planning techniques and correctly drafted documents, this could be one of several tools to help you manage your finances in your golden years.
For help making prudent and long-term plans regarding your final estate, call the Elliot Frazier Law Firm today.