Streamlining Your Joint Accounts and Your Estate Plan is Critical to Minimize the Risk of a Dispute

10 May

Streamlining Your Joint Accounts and Your Estate Plan is Critical to Minimize the Risk of a Dispute

When a loved one dies, family members often react in one of two different ways – (1) the family comes together during a difficult time to honor the memory of their loved one or (2) members of the family begin disputing who gets what and the family becomes embittered and divided.

Estate disputes among family members often occur when the decedent’s estate plan is vague or has conflicting provisions. For example, what happens if the Last Will and Testament or Trust says one thing about an asset, but a joint account is structured in a way that makes it impossible to comply with the directives in the Will or Trust?

Ashburn estate planning attorneyA common example is if a father has a Last Will and Testament that states everything should be divided equally among or between his children, but also owns a joint bank account with just one child named as the co-owner.  Do the other children have a right to a portion of the assets in the account?

In many cases, joint accounts are treated as convenience accounts because they save the primary account holder time by allowing a co-owner to assist in managing their finances. The joint owner is able to write checks, make monthly bill payments, withdraw funds and deposit funds.

Generally, if the primary account holder of a jointly-owned account passes away, the account automatically transfers to the joint owner since it is a non-probate asset. This means it passes directly to the surviving owner rather than through the will.

The only way that a joint account would not pass to the surviving co-owner is when there is clear and convincing evidence of a different intention at the time the joint account was established. Most of the time, clear and convincing evidence is very hard to retrieve.

This creates the potential for a family dispute where the other children argue that the account should be part of the estate and divided equally among the beneficiaries. The dispute could escalate if the joint account was established just prior to the passing of the decedent.

The dispute could wind up being litigated in court which requires an extensive amount of time and money. It can also be extremely stressful, contentious and can further harm family relationships.

Mediation is a possible way to address this type of dispute, but a better course of action is to avoid a dispute altogether by utilizing proper estate planning techniques.  For example, instead of setting up a joint account, create a financial power of attorney and designate a specific person to assist with finances. When a financial power of attorney is used, the person bestowed with this authority can assist with writing checks and conducting financial transfers, but the assets remain available for distribution under a Last Will and Testament and/or Trust.

To learn more about creating a financial power of attorney, schedule a meeting with an experienced estate planning attorney in your area.