A Durable Power of Attorney Can Preclude the Drawbacks of Joint Account Ownership

A Durable Power of Attorney Can Preclude the Drawbacks of Joint Account Ownership

Joint financial accounts are those established and shared by at least two people. Spouses, for example, commonly set up joint bank accounts, with each spouse having equal control and access to the account. Other times, joint accounts are set up between two people who are not spouses, such as between a parent and child or an individual and their friend or business partner. In general, where a trustworthy, reliable relationship exists, joint accounts are often arranged for the convenience of one person on the account who might be unavailable to directly handle their bank affairs such as depositing checks or paying bills.

While entering into a joint financial arrangement with a non-spouse may initially seem like a good idea, the party seeking to add a joint owner on their account would do well to understand that potential drawbacks exist that could put their hard earned funds and savings at risk in the event they die or become incapacitated. You should carefully consider the following situations before adding a joint owner to your account.

Both you and the joint owner on your account receive the same account activity information such as monthly or quarterly statements. Your joint owner may not treat the account information with care or confidentiality, and leave what should be your private information visible for anyone to see and use.

Upon your death, the law dictates that any remaining balance in the joint account goes to the joint owner, regardless of what you may have documented in your last will and testament. So, where your last will and testament intends for your savings to be passed down in equal shares to all four of your children, the eldest daughter you chose as your joint account owner is legally the only one entitled to the money in the joint account, and she has no obligation to split the cash with her siblings. Not only does this go against your final wishes, it is likely the family will also enter into a lengthy battle about how to fairly distribute your savings.

Should you become incapacitated and unable to handle your financial affairs, the joint owner on your financial account essentially has full control of the account and can manage it any way he or she sees fit. An unscrupulous person could wipe out a lifetime of savings with the stroke of a pen.

Both owners on a bank account are subject to each other’s personal liabilities and creditors. If your joint owner files for bankruptcy, for example, creditors can look at the account which may then be subject to collection action. Your years of savings could be depleted because of your co-owner’s financial instability.

To maintain control over your financial matters and be assured your wishes will be carried out the way you want should you become incapacitated, you would be wise to arrange a durable power of attorney through which you name someone to conduct transactions on your behalf. An experienced estate attorney will explain the benefits to having a durable power of attorney as compared to the risks associated with having a joint owner on your financial accounts.

As an estate lawyer in Montgomery County, I give clients peace of mind by setting up their power of attorney document to ensure their financial matters are handled according to their wishes and also to eliminate concerns of their finances being improperly handled in the event of their incapacity. Please feel free to contact me at kam@maloleslaw.com or 267.399.3710 for your free initial consultation on how I can assist you in matters relating to wills, trusts, and estates.

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