New York Estate Planning & Elder Law Blog
There are a number of reasons that people create joint bank accounts. Perhaps you and your spouse want to share a bank account to help simplify your marital finances. You may use joint bank accounts to help teach your children the importance of budgeting and financial planning. You may even need to have access to someone else’s bank account if they are incapacitated or cannot make purchases on their own. Whatever the reason for having a joint bank account, they are not without potential issues when it comes to your estate plan.
Vulnerability
Adding a person as an owner of a bank account inherently makes the account itself more vulnerable. In addition to the potential issues raised below, the more people you add as owners of a joint account the more likely you are to fall victim to theft – including identity theft. By adding individuals to the account, you will increase the risk of lost or stolen cards and/or checkbooks. Additionally, if the person you add to the account is not financially responsible, you risk losing the assets in that account because of poor financial planning.
Creditors
It is important to remember that when you create a joint bank account, both individuals become full owners of the account. That means that the account will count as an asset for both of the people sharing ownership in the bank account. If one of the individual owners is liable to creditors for a debt, then a successful claim could take assets out of the account.
Will Conflicts
Joint bank accounts with a right of survivorship typically supersede a person’s Will. That means that if you list one of your children as joint owner of the bank account with rights of survivorship, then the bank account will not be subject to probate or the terms of your Will. If you only have one child, this may not be an issue. However, if you are talking about a large account that you want to distribute to multiple heirs, naming an individual as co-owner with rights of survivorship could cause unintended conflict among beneficiaries.
Gift Tax
Depending on the circumstances surrounding the joint bank account as well as how many people share ownership of the account, adding individuals as owners may trigger gift tax penalties. An experienced estate planning attorney can tell you more about how the gift tax works and whether or not your assets – including a joint bank account – may be liable for paying it.
Other Legal Concerns
There are a number of legal concerns that surround joint bank accounts, especially when it comes to issues like divorce. If the individual that shares ownership of your bank account goes through a divorce, the bank account could be considered one of their assets and may actually be accessible by the former spouse as part of a divorce settlement. This could end up costing you a lot of money. Additionally, if the person sharing the bank account encounters legal trouble – such as being liable for a car accident – then the assets in the account could be accessible to satisfy a judgment against them.