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Tips on Using Joint Bank Accounts
Joint bank accounts have many valuable uses. Individuals use them for different reasons. In my experience, it is too often for the wrong reason. When you are in the business of estate planning (like yours truly) joint accounts are frequently discussed at initial consultations. From these consultations I know, first hand, that there is a great misunderstanding of how joint accounts are to be used correctly, and to the client’s advantage. Read More below
This article, and several to follow, will discuss explain the most common types and uses of joint accounts. Then, I will go over the circumstances where they can be beneficial, and where they can be harmful.
In order to get the full benefit of using joint accounts, know how each of them works. Here is an overview of the most popular:
Let’s take 5 Examples of some multiple party accounts (what I call joint accounts):
1. “Joint owners with rights of survivorship”, usually designated as “JTWROS” on your bank statement. Married couples often have their bank accounts titled this way. Both owners have rights of use and withdrawal. The account is also exposed to the creditors of BOTH owners. Upon death of one owner the entire balance of the account will typically become the property of the surviving joint owner.
2. “Joint tenants in common”- Each owner has rights to entire account during lifetime but at death, the portion of the account owned by the decedent can pass to whoever the is listed in the decedents will ( if there is one), or to legal heirs determined by state law.
3. POD means “payable on death”. You own the account individually now, and will until you die.
The account becomes payable to a designated person on your death. The POD account is always revocable. The the person to whom you have designatated as owner on your death has NO rights to any part of that account while you are alive.
4. ITF means “In Trust For”- is almost indistinquishable from POD account
5. Brokerage and/or mutual fund accounts use TOD, which means “Transfer on Death” – the rules of ownership are the same as for POD and ITF accounts.
In the following posts I will discuss (all joint account articles will be added to this category of articles contained in the list in the right hand margin of this page) .
We will discuss questions such as:
Is avoiding probate worth having a joint account instead of a Will or Trust?
Why using a Will or Trust is better than using joint accounts.
Using Power of Attorney to give access to accounts instead of changing titles.
And a few more issues I’ve yet to determine.
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