There are many tools you can use when planning for your senior years. People who consult with our office often choose to utilize multiple documents and tools for asset protection, Medicaid planning, estate planning, and planning for incapacity. However, some ways that a person might choose to transfer assets to an heir may not be a very good option. Joint accounts with right of survivorship can cause more problems than they resolve.
What is a Joint Account with Right of Survivorship?
When you open a bank account, you can add another person to the account as a joint account holder. If the account as a right of survivorship, the funds in the account pass directly to the joint account holder upon your death. While a joint account may appear to be an efficient and easy way to transfer assets to another person without the asset going through your probate estate, these accounts can raise significant issues upon your death.
There are several attributes of joint accounts that you should discuss with Longstreet Elder Law & Estate Planning, PC before you determine a joint account with right of survivorship is the best choice in your situation.
- Two or more individuals may be designated as joint account holders.
- Unless there is an agreement between the account holders to the contrary, all account holders are considered to have equal ownership of the account assets.
- Any account holder has the ability and right to withdraw funds from the account.
- The last surviving owner is vested with sole ownership of the assets within the account unless the other account holder has designated a death beneficiary.
- Ownership of the assets in the account passes to the last surviving account holder without going through probate.
Why Does Someone Choose a Joint Account?
In some cases, a person may choose a joint account as a simple way to transfer assets upon death to another person. As mentioned above, joint accounts are often considered easy ways to avoid probate. However, there is another reason that many people choose joint accounts — convenience.
For some individuals, having a joint account is a matter of convenience. In the case of an elderly parent, placing an adult child on the account as a joint account holder can make it easier for the child to pay bills for the parent and manage the parent’s income if necessary. Should the parent become incapacitated or ill, the adult child can continue to pay bills and expenses without the necessity of being appointed as conservator or guardian.
However, a matter of convenience can turn into a huge problem if siblings allege the account should be divided equally upon the parent’s death. A challenge of the right of survivorship can create hard feelings and divide a family.
Because the use of joint accounts can be problematic, it is best to consult with an experienced estate planning attorney to develop a plan that meets your needs but does not create problems for your family. Call Longstreet Elder Law & Estate Planning at 269-945-3495 to schedule a consultation.