The Effect of Joint Accounts on Estate Planning and Distribution

Joint accounts can significantly influence estate planning and how assets are distributed after death. Ensuring that proper legal documents are in place can help protect your finances, save time, and reduce emotional stress for loved ones. Without proper preparation, an estate may go through probate—a legal process that can delay or even prevent intended distributions. In this overview, we’ll cover what a joint account is, how it can affect your estate, and strategies to help you plan more effectively for the future

What is a Joint Account?

Joint accounts are normally financial accounts owned by two or more people. The owners of the account have equal share and equal access at all times to the account. The assets in a joint account belong to both owners, even if one owner would never contribute to the funds. Often times, joint accounts are created for convenience of access for certain individuals.

What Happens to Joint Accounts After the Death of a Co-owner?

When a joint account is held by two account holders, and a co-owner dies, the surviving co-owner can take complete ownership of the account. Since the account is held jointly, the assets would NOT have to pass through the probate process of the deceased co-owner. It all belongs to the surviving co-owner.

Therefore, if beneficiaries are stated in a will, the assets in a joint account will not go to them, and completely belong to the surviving joint-account owner, and the assets do not have to be used for the decedent’s expenses.

The Risk of Insufficient Planning

Unless dealt with properly, these types of accounts will frequently create family disputes when it comes to planning and distributing an estate.

If a joint account is not properly established with specifications, a presumption of a gift of co-ownership and complete ownership upon passing is created. The account must specify that a name is being added for convenience of access and not as a gift of ownership. This should be done by specifying a Power Of Attorney or another designation as required by the Bank or other financial institution.

If not properly specified, the Joint account holder (generally with the rights of survivorship), will be granted complete access to the entire bank account of the deceased co-owner. The joint account will not be part of the decedent’s estate, and it will not go through the probate process.

The Solution – Specifying a POA

Establishing a Power Of Attorney or having a joint account holder are both helpful in assisting the financial needs of loved ones as they get older.

A Power Of Attorney will specify an individual and grant them abilities to make decisions on behalf of the Principal. They possess no rights to any of the Principal’s property. Agents under a Power of Attorney have a duty to make decisions that are in the Principal’s best interest, not for their own gain.

Decisions & Benefits

An important part of a Power Of Attorney that differs from a joint account is that the Principal’s assets are always considered as belonging to the Principal. Whereas, adding a co-owner to a joint account means allowing someone to possess access to the assets of that account. This can lead to a holder making decisions that benefit them and are not in the best interest of the main holder.

A Power Of Attorney Agent’s power will end upon the death of the Principal, and the assets in the name of the Principal will then pass down to the beneficiaries named in the Principal’s Will or go through intestacy.

It is crucial to assess the intent one possesses in regards to the access of their funds. If access is given for convenience and not as a gift of ownership, it may be better to establish a Power Of Attorney.

Seeking Legal Advice

If you are unsure about how to proceed in regards to a joint account or Power Of Attorney for the financial decisions of your estate, contacting an Attorney with valuable knowledge in estate law will help bring clarity to your issue.

The attorneys at Pyfer Reese Straub Gray & Farhat are here to assist you in understanding the need of a Power OF Attorney and guiding you through the process of assigning an Power Of Attorney Agent. Contact us at 717-299-7342 to schedule a convenient appointment to discuss your estate planning needs at our Lancaster, Willow Street, or Ephrata office.

**Disclaimer

This article is meant to be educational and general and in nature only and in no way is providing legal advice. To obtain legal help for your particular circumstace, please contact our offices.