Joint Ownership of Bank Accounts

Senior citizens often add another person's name (a child or other relative) to a bank account, so that if the Senior Citizen becomes disabled or is hospitalized, the other person can write checks to pay the Senior's bills.  Another reason may be to avoid probate. But there are risks to adding another person to your account that you shoud be aware of. 

Some of the most frequently asked questions about joint ownership of bank accounts:

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No. When another's name is added (so that person becomes a joint owner of the account), that person has the legal right to spend the entire account without regard to the wishes of the Senior Citizen who deposited the money.

Yes, there are risks. Most of us trust that our child would never take money from our account to use for his or her own benefit. But it may still happen beyond the child's control. For example, if your child were involved in a car accident and could not pay the bills, the hospital could take the money from your bank account because the child is a joint owner. You might be able to get your money back because it came from Social Security, for example, and therefore should not have been taken. But you would still be involved in a lawsuit and your funds might be frozen and consequently inaccessible for a period of days or weeks.

There are other drawbacks as well. For example, once you have added another person as a joint owner, it is not easily changed. If you later decide to remove them, all the other owners must agree.

For your information, "Joint tenancy" or joint ownership of your home has this same disadvantage - your home could be taken for an involuntary sale to pay debts owed by one of the other owners and if you later decided to seel, all the other owners would have to agree.

Yes, there are safer options.

To avoid probate, you can provide that your bank account will go to the persons you choose by making the account Payable on Death (POD). With a POD, you name a beneficiary (or beneficiaries) who will get your money. Upon your death, the beneficiary (or beneficiaries) will automatically have access to the account without making the person an owner of the account while you are alive.

To allow a person write checks on your account if you become disabled, you can prepare and sign a financial Power of Attorney. You, the person granting the power, are called the principal. The person to whom you give the power is called your attorney in fact or your agent. A Power of Attorney can give as much or as little power as you choose. For example, a limited power might be to allow your agent "to sell my car and deposit the sale proceeds to my bank account" or "to write checks on my bank account to pay my utility bills." A "full" power would allow your agent to transact all your financial affairs for you. In addition, a Power of Attorney can become effective when it is signed or at some future date or event, such as "only in the event of my disability." If you want to name someone to take care of your financial affairs in the event you become disabled, the Power of Attorney must state that it "will become (or will continue to be) effective" even if you become disabled. This is called a "Durable Power of Attorney." Finally, a Power of Attorney can be revoked at any time as long as the principal remains mentally competent to do so. For more information about Powers of Attorney, click here.

No. Because putting someone’s name on your account carries with it certain risks that a power of attorney doesn’t, and because probate can be avoided by safer means, we recommend against joint ownership of bank accounts in favor of other methods.

The information in this site is not intended as legal advice.
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