Why Joint Accounts Often Cause Estate Disputes and How to Avoid Them
The death of a family member can affect the family in one of two ways. Death can either bring family members together or it can cause disputes pushing family members apart. Disputes among family members often occur when the estate planning is unclear and survivors have differing views of what was intended. This can happen when a will or trust says one thing but accounts are structured differently.
For example, if a mother has a Will that states everything should be divided equally among or between her children, but owns a joint bank account with only one of her children there may be confusion about what was really intended. This joint account would then be passed on to that particular child and not be spilt equally among all of the children. A joint account generally passes outside of the will because it is considered to be a non-probate asset meaning it passes directly to the surviving owner rather than through the will.
In most instances, joint accounts are used as “convenience accounts”. In such a case, a mother would have a joint account with her daughter so she could help with the finances. The joint owner, the daughter, is then able to write checks, make payments, withdrawal and deposit money to that specific account without her mother's signature or participation.
This seems to be a good idea because the daughter is able to help take care of the finances for her mother who may no longer be capable of doing so. However, the problem begins when the mother passes away. The joint account then gets passed directly to the remaining account owner - the daughter. The only way that the joint account would not pass to the surviving person is, if there is clear and convincing evidence of a different intention at the time the account was created. Most of the time, clear and convincing evidence is very hard to prove which ultimately leaves the surviving account holder in power and can seem arbitrary or contrary to the will.
The family dispute would begin when the surviving account owner, the daughter, states that the account was always intended to go to her, but the others feel that the account should be added to the estate and divided equally. The dispute could get even worse if the joint account was created not long before the passing of the decedent. The dispute could get so heated that it could end up being litigated which takes time, money, is extremely stressful, and can further damage family relationships. And, while mediation of family will disputes can minimize cost and ease family friction, avoiding these disputes, wherever possible, is the best type of planning.
Instead of having joint accounts, the use of a financial power of attorney can eliminate the possibility of disputes when dealing with individuals having control or helping with other peoples finances. When a financial power of attorney is used, the child or person assisting the elderly family member can write checks and conduct financial transfers, but the assets remain available for distribution under the will.
David M. Frees, III, JD
For more information call, 610-933-8069