Last month Nathaniel Tagtow, JD, of City State Bank wrote a very nice article discussing the drawbacks of adding someone, other than your spouse, as an owner to your bank account. I was so grateful to see his article, because I frequently teach on this very subject. If you did not read his article, I suggest you dig out last month’s magazine and do so.
As he mentioned, sometimes you do not even realize that your son, daughter, etc., was made an owner rather than just given the ability to help you manage your account. If you have “put” someone else on your account, it is worth your time to determine the legal arrangement.
As he also mentioned, a joint owner has no legal responsibility to disburse your money to your other beneficiaries at your death. And, even if the joint owner has the best intentions of doing that, some things can happen in the joint owner’s life beyond their control that can stop them from doing it, even if they want to. Therefore, if the reason you are putting someone else on your account is so they can help manage it, then tell the bank you want them to be a “signer,” not an owner.
Yes. When you die, your account will be frozen temporarily. It is not the permafrost of the frozen tundra or something you need to fear. There are ways you can set it up so that it barely has time to cool, let alone freeze before someone can get legitimate access to your money.
Generally, there are two main reasons why someone puts a child on their account: 1) to help manage the money now and 2) to avoid probate. We discussed that you do not need to create another owner to have someone help you manage it. You should also know that other, less problem-prone methods are available to help you avoid probate, which is a worthwhile goal.
The moral of the story is that there is a danger that you are making things more complicated, not less complicated, for your loved ones after your death by putting bank or investment accounts in joint ownership with someone who is not your spouse. Of course, this is not true for everyone. But no one calls the lawyer to say they don’t need help because it worked out fine.
