As our parents and family members age, there is inevitably a growing concern over their physical, emotional, and financial wellbeing. Oftentimes, these aging individuals require assistance paying their bills and managing their finances, and they turn to a trusted family member, friend, or caregiver for help. This is both common and appropriate. Often, they go together to the bank or financial institution to get shared access to accounts with very noble intentions, and the teller provides a form for a joint bank account.
Before signing a joint bank account document, it’s essential to understand the legal implications, and evaluate whether other options might be better.
Understanding Joint Bank Accounts
A joint bank account is what lawyers call a “joint account with right of survivorship,” meaning that when the elderly account holder dies, the surviving joint account holder automatically and immediately gets ownership of everything in the account. The account is not controlled by the deceased’s will. Therefore, it does not go through probate and is not divided among family members, friends, or charities that might be provided for in the will.
This may not be significant if the initial account balance is small, but can have major repercussions if over the years, the elderly account holder adds significant money to the account – such as the proceeds from selling their house, or the proceeds from selling investments. Without realizing it, by putting that money into a joint account, the elderly account holder might completely unravel their plans on what happens to those funds at their death.
Regardless of the initial intentions when establishing a joint account, it can be easy to unintentionally grow that account, leaving the surviving account holder with sole ownership over the balance. The account’s beneficiary designation will direct who gets ownership of the account balance at death of the first to die, and unless there is a claim that the beneficiary designation was procured by fraud, undue influence, or other legal reason to deny its effectiveness, it will be enforced.
Choosing a Power of Attorney Account
In an effort to address this concern, many banks and financial institutions have developed Power of Attorney (POA) account options. Similar to a traditional joint bank account, a POA account authorizes the additional signatory to deposit and withdraw funds from the account for the convenience of the account owner. However, instead of giving full co-ownership to the account, the funds go to the family member’s estate upon his or her death, if there is no beneficiary designation for the account.
When talking with your bank about a POA account, it may be necessary to speak with a manager, but most banks and financial institutions now have options beyond a traditional joint account.
Protecting Family Members As They Age
There are many considerations to take when helping to protect the interests of an aging family member. From managing their day-to-day finances to establishing Financial Power of Attorney and Advanced Healthcare Directive documents, it’s essential to ensure that all of the details are properly planned and in the best interests of the aging individual. The goal is to assure that after they die, their plans and intentions for what happens to their assets are honored, and not inadvertently upended because the wrong account was used, or the necessary forms were not correctly provided to the financial institution.
Planning for the next stages of your parents’ lives can be complicated and emotional. With the guidance of expert estate and trust attorneys, you can rest assured that their best interests are being protected.
