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
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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”.
What are the legal issues with joint accounts? ›
If the joint account earns interest, you may be held liable for the income produced on the account in proportion to your ownership share. Also any withdrawals exceeding $14,000 per year by a joint account holder (other than your spouse) may be treated as a gift by the IRS. This may subject you to gift tax.
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.
Can I sue someone for taking money from a joint account? ›
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. However, it can be difficult to win these cases. You should consult with an attorney to discuss your legal options.
What overrides beneficiaries? ›
Executors have a fiduciary duty to the estate beneficiaries requiring them to distribute estate assets as stated in the will. This means that an executor can override a beneficiary's wishes if those wishes contradict the express terms of the will.
What overrides a beneficiary on a bank account? ›
Wondering if a will overrides a beneficiary on a bank account? Generally, if the will conflicts with the beneficiary on a bank account, the banking beneficiary designation takes precedence.
How do you know if your joint account has right of survivorship? ›
Generally, and in the past, the most important factor in determining whether a joint account is with rights of survivorship is whether the bank signature card establishing the account identifies the interests of the parties as being with rights of survivorship.
What is the right of offset in joint account? ›
If it's a joint account, the financial institution might withdraw money to cover a debt owed by any joint owner of the account. A financial institution might even apply the right of offset to government payments deposited into your account, such as Social Security benefits.
What are the rights of a joint account owner? ›
Joint Account
A joint owner or co-owner means that both owners have the same access to the account. As an owner of the account, both co-owners can deposit, withdraw, or close the account.
Is a joint bank account considered a trust? ›
That's because a joint account may be considered a trust, a bare trust, and under new trust reporting rules, bare trusts have to file this return. So how do you know if you'll be caught by this? Nicole Ewing, Director of Tax and Estate Planning at TD Wealth, joins us now with what to know.
Right of Survivorship by Default: Generally, joint bank accounts are presumed to have rights of survivorship unless otherwise specified.
Can an executor access joint bank accounts? ›
In this case, an executor or administrator must be appointed by a probate court to access the funds and close out all financial accounts. The executor must prove that the deceased owner has died and submit paperwork (Letters Testamentary, for example) to close the joint bank account.
Can a wife take all the money from a joint account? ›
If the funds in your joint bank account are considered separate property and owned exclusively by your spouse, they may legally be able to drain the account. Similarly, even if the account is community property, a spouse may be able to withdraw money for reasonable living expenses, legal fees, and children's expenses.
Can I empty my bank account before divorce? ›
That means you cannot empty your joint account unless your spouse consents or you get a court order first. If you are considering divorce, it's important to prepare financially. Our attorneys can advise you regarding what information you need to gather and how to address your fears of having no funds.
Can a Judgement take money from a joint bank account? ›
a judgment creditor of your spouse can garnish your joint accounts, and. if you have your own separate bank account and a judgment is taken against your spouse, that creditor can also garnish your separate account to pay for your spouse's debt.
Is money in a joint account part of an estate? ›
Money in joint accounts
Normally this means that the surviving joint owner automatically owns the money. The money does not form part of the deceased person's estate for administration and therefore does not need to be dealt with by the executor or administrator.
Does beneficiary on bank account override a will? ›
The quickest way to undo an otherwise carefully-thought-out estate plan is the use of a bank, brokerage or retirement account. The reason for this is because the beneficiary designations on these accounts generally override a will.
What happens to jointly owned bank accounts on death? ›
Joint Bank Account Rules on Death
"The joint owner becomes the legal and equitable owner of all funds in a joint account at the instant of death," says Doehring. "It does not become part of the probate estate."
What happens if you have a joint bank account and your partner dies? ›
Joint bank accounts
Couples may also have joint bank or building society accounts. If one dies, all the money will go to the surviving partner without the need for probate or letters of administration. The bank may need the see the death certificate in order to transfer the money to the other joint owner.
