WHO COUNTS ON YOUR ACCOUNTS?
Consider this. Dad is getting on in years and increasingly relies on his kids, Jane and John, to help him with everyday tasks. Jane is an accountant so she handles dad’s finances. Dad is pretty old fashioned and almost all of his assets are in his checking and savings accounts. John is a doctor so he handles all of dad’s health-related issues. To make things easier for Jane, dad goes to his neighborhood bank branch and announces to the teller, “I want to add Jane to all of my accounts.” The teller knows dad and Jane quite well and happily adds Jane to the accounts. The teller doesn’t ask dad how Jane should be added, and without giving it much consideration makes Jane a joint owner with rights of survivorship.
Unfortunately, shortly after adding Jane to the accounts, dad unexpectedly suffers a serious heart attack and dies. Jane and John are devastated but in the midst of their grief they decide they need to visit dad’s lawyer and figure out what needs to be done with dad’s will. The lawyer examines the will and tells the kids that dad wanted them to equally share all of his assets. However, as they start to discuss what dad actually owned, the lawyer learns that dad’s bank accounts list Jane as a joint tenant with rights of survivorship. The lawyer has the unenviable task of telling the kids that the Jane automatically becomes the owner of the accounts and there is nothing left for John. Dad’s wish for the two kids to share equally has been thwarted by the titling of his bank account.
There are a number of ways to add someone to a bank account. Someone can be added as a joint owner with rights of survivorship (sometimes referred to as joint tenancy with rights of survivorship), they can be added as a signer (deposit and withdrawal privileges but no ownership rights), or they can be added as a joint owner with no rights of survivorship. If someone is being added to an account and they are acting under the authority of a POA, they should be added to the account as “Jane Doe as POA for John Doe.” When an account is jointly owned with rights of survivorship, the death of one owner automatically transfers full ownership to the surviving owners. This can be convenient and useful for avoiding of probate, but as learned by Jane and John it can also lead to unintended consequences.
If Jane had been added as a signer or a joint owner without rights of survivorship, dad’s money would have been distributed according to the will. If dad wanted to split the money but still avoid probate, he could have made the kids equal beneficiaries of a transfer on death (TOD) or payable on death (POD) designation. In most situations, accounts with beneficiary designations are considered “non-probate assets” that will pass without the need for a probate and are not controlled by the will.
The lesson here is one of vigilance. When you open new accounts or add people to existing accounts, always be sure that you are very clear about ownership of the account and how it is titled.
As always, thanks for reading.
Barry M. Meyers
David M. Neubeck
Elder Law Offices of Barry M. Meyers
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