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Joint Bank Accounts

Joint accounts are simple and convenient,

but you should be aware of potential pitfalls.

A joint bank account can be a useful estate

planning tool, but it is not a substitute for a proper

estate plan and may have unintended consequences.

For that reason, account holders should always keep

their estate planning objectives in mind when creating

a joint account.

The defining feature of a joint account is that any

person named on the account may access the funds

in it, regardless of who deposited them. This right

continues even after one of the account holders dies.

But access does not necessarily equal ownership.

Under the common law, upon the death of

one account holder, full ownership would pass

immediately to the survivors. Typically, this is what

people want. A married couple, for instance, usually

intends that the surviving spouse will become the sole

owner of their joint accounts.

Frequently, though, joint accounts are used as a

convenience to provide access without necessarily

transferring ownership. For example, an elderly parent

may add her son as a joint owner on her checking

account so he can help pay her bills, or a married

couple may authorize a trusted relative to sign on

their savings account to be able to manage their funds

if something were to happen to both of them.

Because of situations like these, many states,

including Utah, have enacted statutes allowing

account holders to override the right of survivorship.

While all the signers on an account are still living,

Utah law provides that each person owns the funds

in proportion to his or her net contributions. Thus,

a parent who adds her child to a savings account

remains the sole owner unless the child also

contributes his own funds. But upon the owner's

death, ownership passes to the surviving account

holders "unless there is clear and convincing evidence

of a different intention at the time the account is

created." Thus, if an owner wishes to give access

without giving survivorship rights, she must clearly

indicate that intent.

Unfortunately, unclear instructions too often lead

to bitter family conflicts and costly litigation. For

instance, upon the death of a parent, a child whose

name was on the parent's savings account may feel

that the parent meant for him to keep the remaining

funds - perhaps as reimbursement for providing

end-of-life care - whereas his siblings may believe

the account should be divided equally among

them. Similar issues can arise in a second marriage

situation. Without clear direction from the owner of

the funds, disagreements can easily arise.

To avoid disagreements, you should think carefully

about what you want to happen to the account and

put your intent in writing. Many banks now offer

specific designations such as "agent" or "payable on

death" that can help you in this regard.

An even better approach, however, is to have

a comprehensive estate plan in place that will

remove the need to rely on joint accounts and avoid

unintended results. An estate planning attorney can

help you think through the consequences and choose

the options that will best meet your needs. To borrow

from the old adage, an ounce of estate planning is

worth a pound of litigation.

Richard K. Gardner is a member of Van Cott's tax,

benefit and estate planning group.