Will Contests

Joint Accounts with Children: Convenient, But Dangerous

By Jeremy A. Wechsler, Esq.

Your Estate Planning & Asset Protection Attorney 

Many people believe that joint accounts are a good way to avoid probate and transfer money to loved ones, particularly for single or widowed clients.  But while joint accounts can be useful in certain circumstances, they can have dire consequences if not used properly. Adding a loved one to a bank account can expose your account to the loved one's creditors as well as affect long-term care planning. 

The first problem with joint accounts is that once money is deposited into the account, it belongs to both account holders equally, regardless of who deposited the money. Account holders can withdraw, spend, or transfer money in the account without the consent of the other person on the account. When one account holder dies, the money in the account automatically goes to the other account holder without passing through probate.

The second problem with joint accounts is that it makes the account vulnerable to all the account owner's creditors. For example, suppose you add your daughter to your bank account. If she falls behind on credit card debt and gets sued, the credit card company can use the money in the joint account to pay off your daughter's debt. Or if she gets divorced, the money in the account could be considered her assets and be divided up in the divorce.

Third, joint accounts can also affect Medicaid eligibility. When a person applies for Medicaid long-term care coverage, the state looks at the applicant's assets to see if the applicant qualifies for assistance. While a joint account may have two names on it, most states assume the applicant owns the entire amount in the account regardless of who contributed money to the account. If your name is on a joint account and you enter a nursing home, the state will assume the assets in the account belong to you unless you can prove that you did not contribute to it.

In addition, if you are a joint owner of a bank account and you or the other owner transfers assets out of the account, this can be considered an improper transfer of assets for Medicaid purposes. This means that either one of you could be ineligible for Medicaid for a period of time, depending on the amount of money in the account. The same thing happens if a joint owner is removed from a bank account. For example, if your spouse enters a nursing home and you remove her name from the joint bank account, it will be considered an improper transfer of assets.

There is a better way to conduct estate planning and plan for disability. A power of attorney will ensure family members have access to your finances in the case of your disability.  For a comprehensive review of your plan and more sophisticated strategies, please contact my law office for a complimentary consultation at (215) 706-0200.

Huguette Clark passed away in 2011 at the age of 104, leaving in her will $300 million of her estate to charities, her nurse, her hospital, attorney and accountant. The last known picture of her was from 1930, and she lived a reclusive life as an heir to a family fortune.

Now, Ms. Clark's estate is embroiled in litigation with no end in sight. She had no close family members, only distant relatives. She wrote two wills, only a couple of months apart. The first one left part of her estate to the distant relatives, and the second will cut out the relatives.

Although Ms. Clark left a large estate of $300 million, we can all learn from the mistakes she made. For more information about the estate planning mistakes she made, check out this New York Times article here.

Last night's CBS 60 Minutes program featured a piece on Michael Jackson's estate. If you missed the tv program, check out the story by clicking the link below. Michael Jackson set up a trust for his mother to care for her during her lifetime, but the bulk of the estate will go to his three surviving children. Michael Jackson, now deceased, has made more money in the last few years than any living celebrity. Wow!

https://www.cbsnews.com/8301-18560_162-57585140/michael-jacksons-lucrative-legacy/

Reasons for Conflicts with Your Estate - Make sure you see an attorney to help ensure there will not be any possible will challenges or conflicts with your estate! Here are ten reasons why conflicts often occur:

1.     Your will is unclear, ambiguous and not written properly.

2.     You don’t have a will at all or it has not been updated recently.

3.     Your Power of Attorney was poorly written, you have a bad agent and/or the powers are abused by the agent.

4.     You do not communicate with your family despite knowing there is a potential or current conflict in the family.

5.     You fail to explain the reasoning for choosing one child as Executor, or explain other major decisions you have made.

6.     You make unequal distributions to children without any explanation to them.

7.     Your new will and previous will(s) contradict each other.

8.     Your will is written while you are incompetent.

9.     If you want to disinherit a child, the disinheritance clause isn’t clear or doesn’t exist in your will.

10. There are conflicts in a trust between current beneficiaries (how much they can spend) and what’s left for the contingent beneficiaries (the ones who get what’s left). Clear rules need to be written into the trust to make sure that does not happen.