By: Joseph T. Buxton III, CELA*, Founder, TrustBuilders Law Group 

For convenience and minimal cost, many folks use a joint account for estate planning purposes.  It is easy; its simple, and its dangerous-just put someone on your bank accounts to manage the account if you become disabled and at death.  This is a joint account with survivorship. 

Let me tell you about a recent case:  a mother in her 80’s felt she needed someone to help manager her affairs if she became disabled and to carry out her wishes when she died, she put one of her children on the accounts with her.  Mother assumed the child will carry out the wishes, pay the bills, and when she dies distribute the assets to her children.  In reality, this often never happens.

According to the law, the survivor on a joint account generally owns the account. In this case, Mother’s accounts belonged to the child.  He had no legal obligation to do anything with those funds except spend them?  Once put in the child’s name, there was no guarantee bills would be paid or that distributions would be made to any of the other children  

A joint account with survivorship is a precarious estate plan.  For example, the joint owner may predecease the original owner and the plan will fail- there is no way then to pass assets at death except through court supervised probate....

Another problem with using joint accounts as an estate plan: the creditors of the new owner may come after the accounts to collect the debt.  Finally, the joint owner may become incapacitated and unable to manage the account. The joint account estate plan is essentially worthless during the parents’ lifetime. 

For these reasons, I caution clients against using a joint account for estate planning.  A better choice is using a revocable living trust. Here the parent puts their accounts in their own name as trustee and names the child as a co-trustee or co-manager of the trust accounts.  If the parent becomes disabled or dies the child manages the account as a fiduciary and must carry out the parent’s instruction and distribute the estate as spelled out in the trust document. The child as trustee is prohibited from pocketing the assets or diverting them for his own purposes.

When planning for disability and death be very careful when using joint accounts.


* Certified Elder Law Attorney by the National Elder Law Foundation