Owning a bank account jointly with someone is a bigger deal than you might think. Far too many people open savings or checking accounts without giving serious thought as to how it’s being titled…and how that choice may backfire in the future.
For example, many seniors believe they are making life easier for themselves by adding adult children to their bank accounts. Doing this allows their son or daughter to immediately access their money to pay bills and manage their long-term care.
What mom or dad might not fully understand, however, is that legally their son or daughter now owns half of their funds. So, if their child runs into financial issues, creditors can now go after mom’s money. Or if there’s an accident, dad’s money is fair game in a judgment. Unforeseen circumstances could easily wipe out the savings mom or dad were relying on to support themselves for the rest of their life.
Greater surprises can happen when people choose “payable on death accounts” as a means to avoid probate and formal estate planning. While payable on death accounts do help you avoid probate by naming a specific beneficiary to inherit your money after death, it’s also an easy beneficiary designation to forget. In this case, it’s entirely possible that someone you no longer want to inherit your account (such as an ex-spouse, deceased relative, estranged loved one, etc.) may still be listed on the formal paperwork if something happens to you.
These mistakes happen every single day and cost people a lot more than a little time and frustration. Critical savings accounts and inheritances can be on the line if your bank account is not titled correctly.
So the next time the bank teller asks you how you would like to title your checking or savings account, put some serious thought into the decision.
Steve Greenwood, Esq.