Should I Jointly Own my Bank Account?

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Adding people to a bank account gives them access to the funds.

There are times when someone may need to access your bank account to manage your finances.

If you are incapacitated, you are unable to accomplish certain tasks on your own.

It may be tempting to simply add someone as an owner of the account so they can handle your financial responsibilities.

According to a recent Lehigh Valley Live article titled “What are my rights when someone adds me to a bank account?,” this option may not be wise for your circumstances.

Your bank account can be transferred through several methods.
It may not be best to add a joint owner to your bank account.

Accounts can be held jointly by two or more individuals.

When this occurs, each owner has equal responsibilities and ownership in the account.

Any fees or expenses become the liability of both individuals.

In some cases, transactions require the consent of both owners for completion.

Not all joint ownerships looks the same.

The different types of joint accounts are governed by specific rules.

These rules impact estate planning for the bank account.

What are they?

Joint Tenants with Rights of Survivorship

In this instance, the surviving owner will directly inherit the assets when the other account holder dies.

Think of it as “playing musical chairs” with the account.

As you remove account owners the remaining owner(s) own all of the chairs.

Assets held until their is no surviving joint owner will bypass probate.

However, when the last surviving owner dies, well, that is when probate happens.

Tenants in Common

The assets are held in portions.

The account owners may divide the assets in half, or they may agree to an unequal split.

Each owner can designate a beneficiary to inherit his or her portion of the bank account.

Tenants by the Entirety

This joint ownership is specifically for those who are married and this form of ownership is not available in all states.

It is not available to spouses in Kansas, but it is in Missouri just two miles east of my office/home in Overland Park, Kansas.

When they are tenants by the entirety, each spouse holds equal ownership in the 100% of the property and cannot transfer their respective halves while they are alive or through a will when they die.

The entire account will pass directly to the surviving spouse when one spouse dies.

Although these forms of ownership can keep the bank account outside of probate, they can place the funds at risk while you are live.

How so?

Except for tenants by the entirety, your asset will be subject to the financial and legal liabilities of your joint owner(s).

Sidebar: the only way assets held a tenants by the entirety will be endangered if for any “joint” liability of the spouses.

If your main motivation for adding another owner to your bank account or other assets is ongoing management upon you incapacity, then consider a general durable power of attorney.

This legal instrument will allow you to appoint them as your “attorney in fact” to manage your financial affairs when you cannot do so yourself.

Your assets will not be subject to their financial and legal liabilities.

Different powers of attorney provide unique benefits.

A general durable power of attorney gives authority to handle your property, legal, and financial matters when you become incapacitated.

This authority must be granted while you still have mental capacity and it must state that it is a “durable” power of attorney.

A limited or special power of attorney only grants authority to another individual to take action on certain transactions and/or for a limited duration.

A “springing” durable power of attorney specifically triggers the authority only when you are declared incapacitated.

Your attorney in fact cannot act until that fact is established as provided in the legal instrument itself.

Powers of attorney and joint ownership are not mutually exclusive.

Work with an experienced estate planning attorney to create a plan for your bank account and other assets.

ReferenceLehigh Valley Live (June 10, 2021) “What are my rights when someone adds me to a bank account?”

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