On Friday, February 17th, Attorney, Steven Berger shares the advantages of Joint accounts and some common pitfalls.

Multiparty accounts that pass to beneficiaries are not subject to probate under the law.

A convenience person means that you are added to the account, but you don’t contribute to it and upon death you no longer have access. It’s more like a power of attorney position versus a beneficiary.

If mom opens an account with her son and daughter. In a payable upon death situation, they become joint owners upon death. Presumably they would each be privy to half, however nothing prevents one person from withdrawing all of the funds.

When one person contributes all, then there is no gift until death etc. However, if mom tells her daughter she can take $100 here and there and it eventually breaches a certain threshold then taxes will need to be addressed.

If a lawsuit is initiated against the daughter and she loses. The judgement could be executed against the joint account she has with her mom even though she hasn’t contributed to the money in that account at all.

However, their currently is a lawsuit in Maryland that mostly refutes the above scenario. However, if a little contribution is being made it gets murky.

If there is a tax lien from the IRS , this can affect the hypothetical above as well. An example would be if daughter or her husband didn’t pay their taxes and the IRS goes after the joint account daughter is attached to.

Sometimes parents open a bank account for their minor children and have to be attached to those and often forget to take themselves off once their minor reached adulthood. This can cause some of the above problems as well.

Another scenario is where dad’s health deteriorates, he moves in with his daughter and chooses to sell his home. After he puts his daughter on his bank account, all the proceeds from the home sale go to the joint bank account. Shortly after, dad passes away and all the money goes to the daughter as the “survivor”. The Will stated everything was equal between her and her brother. However, the Court ruled that all the funds belonged to the daughter as the joint account survivor. However, if she chose to give some to her brother-she could as long as she filed a gift tax return if above the threshold.

They can be an easy alternative to power of attorneys. Always think hard before making the choice to open a joint account. Power of attorneys and Trusts should be considered.

Have a great weekend!

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