Three Reasons Why Joint Accounts May Be a Poor Estate Plan

Many people, especially seniors, see joint ownership as an easy way to avoid probate and plan for incapacity, but there are major drawbacks to joint accounts.

When people own property as joint tenants each person has an equal ownership interest in the property. If one joint tenant dies, his or her interest immediately ceases to exist and the other joint tenant owns the entire property. 

Joint ownership of investment and bank accounts can be a cheap and easy way to avoid probate since joint property passes automatically to the joint owner at death.

In addition, joint ownership can also be an easy way to plan for incapacity since the joint owner of accounts can pay bills and manage investments if the primary owner falls ill or suffers from dementia. These are all true benefits of joint ownership, but three potential problems with joint ownership:

  1. Risk. Joint owners of accounts have complete access and the ability to use the funds for their own purposes. Many children who are caring for their parents take money in payment without first making sure the amount is accepted by all the children. In addition, the funds are available to the creditors of all joint owners, so if the child got divorced or was sued, the money could be available to the child’s creditors. Similarly, if a joint owner applied for public benefits or financial aid, the money would be considered as belonging to all the joint owners.
  2. Inequity. If a senior has one or more children on certain accounts, but not all children, at her death some children may end up inheriting more than the others. While the senior may expect that all of the children will share equally, and often they do in such circumstances,

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