As part of a 30-day series on estate planning strategies, Financial-Planning.com included an article about the mistitling of assets. The article talks about two different types of account titles that families often use: joint tenants with right of survivorship (JTWROS) and Convenience accounts. Utilizing these types of accounts might seem like an easy way to give an adult child access to help an elderly parent manage his or her finances. However, these accounts also tend to lead to legal disputes in the long run.
The problem with titling a bank account as JTWROS is that the balance of the account goes to the living person when the other person on the account passes. This means that if a parent had intentions of distributing the surplus left over to all of their children, their wish would not be fulfilled. Instead, the child on the joint account would receive the entire sum.
Convenience accounts are used when the owner of the account wants another person to have access to the account in order to pay bills. In this case, the convenience signer does not own the account. However, the article notes that “they lead either to a future probate of the account or the convenience owner absconding with the funds because he feels he deserves them.”
Rather than using either of these options, either setting up a Comprehensive Durable Power of Attorney or establishing a Trust may the best choice. A Power of Attorney allows you to appoint someone to handle your finances in the event you can no longer do so for yourself. Powers of attorney cease upon death so the person appointed will not have access to the accounts upon the passing of the account owner. Funds can then be distributed as outlined in the individual’s Last Will and Testament.
At Tully Law, P.C. we can help you explore the different ways to own and title your accounts and can advise which planning documents and strategies should be implemented based on your circumstances.