If all of your assets have a joint owner and/or a beneficiary listed, your estate may not need to go through the court-supervised probate process. But before you rush out to make those changes on your accounts, here are some things to think about joint accounts:
- The other joint owner can withdraw the entire account out of the bank.
- Creditors of the joint owner can zap the account and clean it all out. Think judgments, tax liens, back child support, bankruptcy, divorce, etc.
- Surviving joint owner gets the entire account at death–regardless of what your estate plan provides.
- Funds are reported on college financial aid applications for the joint owner.
- Doesn’t provide any Medicaid planning protection.
I frequently get calls from children questioning why their parent’s estate didn’t go through probate after the parent died. If we start doing a little digging, we typically find out that at some point the parent listed another individual (typically another sibling) as the joint owner. Thus, when the parent dies, the child listed as the joint owner gets 100% of that account. Maybe they will share with the other family, but commonly they don’t. Imagine the frustration/anger when the others see the Will that provides for an equal distribution. That doesn’t mean what happened is automatically wrong, but there can certainly be questions.
For example, this can raise a question as to whether there is a cause of action for some type of improper activity in getting that person listed as a joint owner. This gets into the area of confidential relationships that you can read a little more about here or intentional interference with inheritance here.