Why Joint Accounts Often Cause Estate Disputes and How to Avoid Them
The death of a family member can affect the family in one of two ways. Death can either bring family members together or it can cause disputes pushing family members apart. Disputes among family members often occur when the estate planning is unclear and survivors have differing views of what was intended. This can happen when a will or trust says one thing but accounts are structured differently.
For example, if a mother has a Will that states everything should be divided equally among or between her children, but owns a joint bank account with only one of her children there may be confusion about what was really intended. This joint account would then be passed on to that particular child and not be spilt equally among all of the children. A joint account generally passes outside of the will because it is considered to be a non-probate asset meaning it passes directly to the surviving owner rather than through the will.
In most instances, joint accounts are used as “convenience accounts”. In such a case, a mother would have a joint account with her daughter so she could help with the finances. The joint owner, the daughter, is then able to write checks, make payments, withdrawal and deposit money to that specific account without her mother's signature or participation.
This seems to be a good idea because the daughter is able to help take care of the finances for her mother who may no longer be capable of doing so. However, the problem begins when the mother passes away. The joint account then gets passed directly to the remaining account owner - the daughter. The only way that the joint account would not pass to the surviving person is, if there is clear and convincing evidence of a different intention at the time the account was created. Most of the time, clear and convincing evidence is very hard to prove which ultimately leaves the surviving account holder in power and can seem arbitrary or contrary to the will.
The family dispute would begin when the surviving account owner, the daughter, states that the account was always intended to go to her, but the others feel that the account should be added to the estate and divided equally. The dispute could get even worse if the joint account was created not long before the passing of the decedent. The dispute could get so heated that it could end up being litigated which takes time, money, is extremely stressful, and can further damage family relationships. And, while mediation of family will disputes can minimize cost and ease family friction, avoiding these disputes, wherever possible, is the best type of planning.
Instead of having joint accounts, the use of a financial power of attorney can eliminate the possibility of disputes when dealing with individuals having control or helping with other peoples finances. When a financial power of attorney is used, the child or person assisting the elderly family member can write checks and conduct financial transfers, but the assets remain available for distribution under the will.
David M. Frees, III, JD
For more information call, 610-933-8069
[emailprotected]
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FAQs
A joint account generally passes outside of the will because it is considered to be a non-probate asset meaning it passes directly to the surviving owner rather than through the will. In most instances, joint accounts are used as “convenience accounts”.
Can a joint bank account be contested? ›
A joint bank account can be contested because of fraud, incompetence, or other reasons. However, you should be prepared to take swift action with a lawyer.
Why you shouldn't have a joint account? ›
You cannot control how the other party spends your money. If your partner decides to spend frivolously, you will both feel the blow. This sort of problem can lead to many fights about what is necessary to spend on and what isn't. More of these issues may arise if one party brings in more income than the other.
Can you garnish a joint bank account? ›
Your joint account may be garnished for that debt even if you did not owe that debt. Your account may be garnished whether or not you own it separately from your spouse.
Does executor have access to joint bank account? ›
Only joint owners, beneficiaries or executors can access a deceased person's bank account.
Does a joint account count as part of an estate? ›
Gifts With Reservation Of Benefit: If an individual gives away a joint bank account but continues to benefit from the account, this may be considered a gift with a reservation of benefit. In this case, the value of the joint bank account will be included in the estate of the individual for Inheritance Tax purposes.
What are the dangers of a joint account? ›
A joint account might damage your credit score
Opening a joint account adds a financial link to the other person. This means companies will look at both of your credit histories as part of any credit checks. If they have a poor credit history, this might lower your chances of acceptance.
What does the Bible say about joint bank accounts? ›
The Bible doesn't say explicitly that spouses should share one account. People didn't have bank accounts back then. So, we have to look at the bigger picture. Jesus said in Mark 10 that marriage is about two people becoming one.
What are the problems with joint bank accounts? ›
Co-owners on the account are both responsible for fees, such as overdraft charges. If one holder lets debts go unpaid, creditors can go after money in the joint account. Both holders can see transactions in the account, which can present privacy issues.
Can creditors go after joint bank accounts after death? ›
Non-probate assets creditors can claim
Examples include joint bank accounts, joint property, life insurance or retirement benefits, and property held in the name of a trust.
Learn about your rights. Creditors might be able to garnish a bank account (also referred to as "levying" the funds in a bank account) that you own jointly with someone else who isn't your spouse. A creditor can take money from your joint savings or checking account even if you don't owe the debt.
Can I sue someone for taking money from a joint account? ›
What should I do if my ex-partner takes money from our joint account or runs up debt on our joint credit card without my permission? If your ex-partner takes money from your joint account or runs up debt on your joint credit card without your permission, you may be able to sue them in court.
Does a joint bank account trump a will? ›
Yes, joint ownership of an account overrides a Will. The joint ownership will be effective over and supersede any directions in your Last Will and Testament regarding a specific account and how those assets are divided.
Is a joint bank account considered inheritance? ›
If the surviving joint owner is not a spouse, then the fair market value of the entire account will be included in the decedent's estate. If the surviving joint owner is the surviving spouse, then only 50% of the fair market value is included in the value of the decedent's estate.
Who owns the money in a joint bank account when one dies? ›
Most joint bank or credit union accounts are held with “rights of survivorship.” This means that when one account owner dies, the money passes to the surviving owner, or equally to the rest of the owners if there are multiple people on the account.
