Be Careful About Adding People as Joint Owners On Your Accounts

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You should carefully consider the consequences of adding people to your accounts.

You should carefully consider the consequences of adding people to your accounts.

Various types of bank accounts which have just the owner of the account on them have the virtue of simplicity and the comfort of knowing that the account will pass according to your Will instead of to the joint owner.. But sometimes other considerations make it desirable to add someone else, usually a relative, to an account. You can add them to the account as an owner or you can add them as a power of attorney. If you add them as a power of attorney they do not have a right to use the funds for their own benefit and the account would not automatically pass to them upon your death. If you want to designate individuals on your account to take the account upon your death you could add a Payable on Death designation to the account which allows you to name beneficiaries who take the account in the event of your death.

An obvious consideration when adding people to an account, whether as an owner or power of attorney, is whether there is a trusting relationship between or among everyone whose name is on an account. If another person is on the account as an owner then they can remove funds from the account, though many state laws say that this money belongs to the person who contributed the funds to the joint account.

The person you name as a joint owner will likely receive the account upon your death even if your Will were to say that this account goes to a different person.

Joint Bank Accounts

Under FDIC rules, a joint account is a deposit account owned by two or more people who have equal rights to withdraw all of the deposits and to close an account. Married couples, assuming they want to share the funds in the account, like the convenience of such a joint account so that either person can write checks on the account and pay bills from it. At an FDIC‑insured institution, each co‑owner is insured for up to $250,000 for his or her share in all joint accounts in that institution. But if all persons on the account do not have equal withdrawal rights, the account will not necessarily be FDIC insured up to the same amount as for a true joint account under FDIC rules.

If the goal is to give someone limited access to a bank account when needed but not to grant ownership rights to the account, an alternative is to grant that person a power of attorney. Powers of attorney, which typically authorize someone to represent or act on another’s behalf in financial matters, can be crafted to permit the desired amount of access to bank accounts.

Conclusion

If the goal is to give someone limited access to a bank account when needed but not to grant ownership rights to the account, an option is to grant that person a power of attorney. Powers of attorney, which typically authorize someone to represent or act on another’s behalf in financial matters, can be crafted to permit the desired amount of access to bank accounts. There is a major difference between adding someone as a joint owner and adding them as a power of attorney. It can create confusion when someone names a person as a joint owner on an account. The question is always whether that person intended the joint owner to actually inherit that asset or whether they were just trying to give them access to help them pay bills and manage finances. If you add a person as a co-owner to an account you should intend that person to take the account in the event of your death. If you just want to add them on the account to pay bills then you should create a power of attorney and add them to the account as your power of attorney.

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