A joint account can be a useful device for pooling resources and eliminating the time and expense of maintaining two separate accounts. Under a joint account, two (or more) people have individual control over all assets in the account. Any of the joint account holders are free to contribute to and withdraw from the account without the need for explicit approval from the other joint account holders. When one of the joint account holder dies, the account does not need to go through probate since the assets in the account are already the property of the remaining account holder(s). The deceased account holder is merely removed from the account.
A typical use for a joint account is for a couple sharing their resources to efficiently manage a household. The couple can simplify their day to day financial planning by dividing everyday financial tasks without having to maintain multiple accounts and figuring out which account is going to have to pay for what expense.
However, adding someone to a joint account with the intent of allowing them to manage your finances in case you are unable to do so is problematic. When you make someone a joint account holder, the money becomes theirs as much as it is yours. Any joint account holder can make any withdrawal for any reason. Additionally when a person dies, instead of the remainder of the account going to the beneficiaries of your estate plan, whatever is left automatically goes to the living joint account holders.
Even if the joint account holder is completely trustworthy, a joint account holder can only manage that one account. They cannot make comprehensive planning decisions that may better protect and manage your assets on your behalf.
A durable power of attorney, drafted by a lawyer, is a much better planning tool for allowing someone to take care of your affairs in case of an incapacity. In short, a durable power of attorney can allow someone to manage all of your assets while also legally binding them to act in your best interests and in accordance with your wishes. Having the full power to manage all of a person’s assets opens up a range planning tools that can allow you to receive government benefits while protecting your estate. A durable power of attorney can also be drafted to only go into effect in the specific case of your incapacity.
A more detailed description of the benefits of a durable power of attorney can be found in this previous post: Durable Power of Attorney
To make sure your estate plan has the proper planning tools in place to protect yourself and your assets, please call Martha C. Brown & Associates at (314) 962-0186.