Problems with Jointly Held Accounts
Any time you add another person’s name to your bank account, it becomes joint ownership. Many people do this with the thought of making the account accessible to someone in case of an incapacity. What they fail to realize though, is that if the person added is involved in a lawsuit, bankruptcy, creditor claim or divorce, any money in that jointly held account will be subject to those claims.
In addition, should the added person pass away, all amounts in that account will be considered part of their estate for tax purposes.
There are 2 solutions to the above problem:
Payable on Death (POD) Accounts
Putting one child’s name on your bank account as Payable on Death expecting that he will “do the right thing” and distribute any money left equally among himself and his siblings:
There are 2 problems with the above:
Having No Estate Plan
Having no estate plan at all will lead to the following:
- Kids get unfettered control of their inheritance at age 18. What if they are not responsible enough at 18 to make good financial decisions? What would you have done with the money at age 18?!
Mom and I are finally getting over the shock of your death resulting from a head on collision with a drunk driver who had no insurance. Mom said she had tried to convince you to create a will, but that you felt you were too young – you were after all, only 39 years old. There were a few things you didn’t get around to discussing with mom and I while you were still here with us. Imagine our surprise when we found out that you had a child out of wedlock when you were 17. I have an older half-sister I was never aware of – mom said she always had her suspicions. Because you didn’t create a will or a trust, your estate now must be probated and will be subject to the laws of intestacy. A big word but essentially it means that since everything you and mom had was community property, mom gets nothing and I share half your estate with a sister I never knew. I, of course, can help mom, but your daughter is a little upset you weren’t involved in her life. She’s thinking about having her mom sue your estate for back child-support payments.
My mom died very unexpectedly at the young age of 50. While she did have a will leaving everything to my father, I don’t think she gave consideration to how that might affect her children in the future.
We were a very close-knit family while mom was still alive so it was a bit of a shock when my dad started dating a woman within one month of my mom’s passing – he married this woman 4 months later. I don’t blame my father for wanting to find a companion – after all, he and my mom were a very loving couple, best friends even and losing her left a large void.
The problem came when after some time had passed, us children wanted to have a few of our mom’s personal items. In particular, I wished to have one of her cake plates. You would think that something so simple wouldn’t be a problem, but my father made me ask his new wife’s permission to take the plate. I can’t begin to tell you how hurt that made me feel. It was my mom’s plate, not his new wife’s plate.
I know very well that had my mother still been alive, she would have just given the plate to me…probably without even mentioning it to my dad as he wouldn’t have minded at all.
Quite often it is the little things, the personal possessions which have sentimental value, which cause so many persons to argue after the death of a loved one. With a little planning and foresight, this situation would have never taken place.
Who gets your “stuff”? Remember when dividing personal effects equally – a grandfather clock can’t be split 3 ways. Equal means equal in value. Be sure to be very clear in spelling out who gets what, or if you want to leave the decision to the beneficiaries, give them detailed instructions on how to go about dividing everything (for instance drawing straws or flipping a coin.)
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