Banks Wreak Havoc on Estate Planning By Forcing the Use of Joint Accounts

Recently, I met with a new client, and was confronted yet again with the result of bad advice from bankers. The client had a power of attorney which named her daughter as her attorney-in-fact. However, the client also had a joint bank account which named both her and her daughter as owners. When I asked why the account had been set up as a joint account, instead of as an account in Mom’s name with her daughter as attorney-in-fact, I was given a very common answer. The client’s daughter told me that the account had originally been set up in Mom’s name, with daughter as attorney-in-fact. However, the daughter had repeatedly had difficulty making deposits to the account or otherwise dealing with the account while at a bank branch. The bank had eventually told the daughter and the client that the account should be made into a joint account. The explanation given by the bank was that their computers did not show that the daughter was the authorized attorney-in-fact, and so the branch personnel had no way to tell at a glance that the daughter was actually authorized to act with regard to the account.

I explained to the client and her daughter that the joint account would automatically pass to the daughter 100% at the client’s death, instead of passing to all of the client’s children under her Will. This was NOT the client’s intent. Georgia law assumes that this is the intended result when a joint bank account is established. While the daughter could certainly share the remaining account assets with her siblings after Mom’s death, there would be no legal requirement that she do so, and she could have gift tax consequences from doing so. The daughter could also disclaim the remaining account assets, but a disclaimer must be completed correctly within no more than nine months after Mom’s death in order to work. A disclaimer also does not always accomplish the intended result. In addition, because the daughter was listed as an owner of the account, the assets in Mom’s account were potentially subject to problems that the daughter might have. If the daughter had financial difficulties for any reason, her creditors could have ended up with Mom’s assets. This means that a joint account puts both Mom, personally, and her estate plan at risk.

In short, the best way to ensure that the remaining assets in the account passed to Mom’s intended beneficiaries is to have Mom be the only owner of the account. Having Mom be the only owner of the account also protects Mom from potential problems her daughter might have. The daughter should be on Mom’s account only as her attorney-in-fact, not as an owner. However, because the bank has failed to set up its internal records appropriately, the bank pushed the client into setting up a joint account even though that was not the intent.

At our firm, we have seen this happen way too many times. Clients who should not have joint accounts end up with joint accounts because the banks prefer that they not have to keep track of attorneys-in-fact. This is unacceptable. Modern electronic records should be easily able to show not only the owner of an account but also that a particular person has been authorized to act as attorney-in-fact on the account. There is no reason that banks should be forcing clients into joint accounts. There must be millions of powers of attorney out there. It is time that banks recognized this fact and figured out how to allow attorneys-in-fact to access accounts without being inappropriately named as account owners.

Loraine M. DiSalvo

2016-12-22T06:23:51+00:00 December 17th, 2013|Blog|

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