In the estate planning consultation, oftentimes older clients will inform me that their bank account are jointly owned with an adult child or that an adult child is named as the Pay on Death Beneficiary. These financial decisions have real consequences and should be weighed carefully.
A joint account is an account with more than one owner. Making your child a joint account owner means that your child can withdraw money from the account without your consent for her own benefit. It also means that should you die, your child will become the sole owner of the account, which may be counter to your Last Will and Testament. A Last Will and Testament only governs probate property, which does not include joint accounts. If the purpose of the Joint Account is merely to give access to your child to assist you in handling your finances, then a financial power of attorney would likely be a better option. A financial power of attorney gives your child the authority to transact on your behalf. However, as an agent, she would be required to only engage in transactions that benefit you. Also, she would not be entitled to the bank account contents upon your death.
Pay on Death Designation
A Pay on Death Designation on a bank account dictates who will receive the account proceeds upon your death. It has no effect on the account during your lifetime. Making a pay on death designation means that the account will not need to go through probate. Hence, the disposition of the account will not be governed by a Last Will and Testament. The designation on the bank account and any other assets, like retirement plans, should be considered when making an estate plan as oftentimes the intended disposition of property per a Last Will and Testament is inconsistent with the actual disposition because of joint accounts and beneficiary designations.
For more information on estate planning, including titling bank accounts and beneficiary designations, contact a Cleveland Estate Planning Lawyer.