Is it better to have a POA or joint bank account?
Most estate planning attorneys recommend the use of a POA rather than adding an owner to a joint account.
Each person on the account has the legal authority to use the entire account balance for any reason. In contrast, a person holding a power of attorney also has access to the grantor's bank account, but he or she is legally required to use those funds for the benefit of the grantor.
- Shared Responsibility: Joint accounts require a high level of trust and financial responsibility. ...
- Ownership and Liability: Both account holders are equally liable for any overdrafts, debts, or liabilities associated with the account. ...
- Privacy Concerns: Joint accounts lack privacy.
If you want to add someone as attorney-in-fact to your bank account, it is important that you designate it properly. The attorney-in-fact should be designated on the account as "POA". This designation makes it clear that the person is acting on the account as a fiduciary, not as a joint owner.
Having a joint bank account with an elderly parent can be convenient, but it usually isn't the ideal approach to helping your parent with money matters. If you have siblings, it easily could lead to disputes.
Joint bank account holders generally have the right of survivorship, which grants the surviving account holder ownership of the entire account balance. The surviving account holder retains ownership regardless of which owner contributed the money, and the account doesn't go through the probate process.
Joint bank accounts
Couples may also have joint bank or building society accounts. If one dies, all the money will go to the surviving partner without the need for probate or letters of administration. The bank may need the see the death certificate in order to transfer the money to the other joint owner.
Ownership of joint accounts and any money within them will generally revert to the other named individuals on the account. For example, if one spouse were to die, the other spouse would still be able to legally access all money in their shared joint account. This money would not be frozen.
After all, pooling one's resources seems to make a marriage happier and more stable—something most couples want when they first say “I do.” “Couples do seem to be happier when they have a joint account, at least for those first two years of marriage—and possibly later, too,” says Olson.
Who Pays Taxes on Interest From a Joint Bank Account? If you have a joint account, you both may have to pay taxes on a portion of the interest income. However, the bank will only send one 1099-INT tax form. You can ask the bank who will receive the form because that person has to list the income on their tax return.
What are the risks of being a power of attorney?
In rare cases, a POA can be abused by an agent who tries to take advantage of their power over your affairs, which is a crime, according to the National Center on Elder Abuse. That's why it's so important to choose an agent you completely trust to act responsibly.
RESISTANCE BY BANKS
Because the durable financial power of attorney is sometimes abused, either by relatives seeking to benefit themselves or by criminals who forge them to steal from the elderly, banks seek to avoid being held liable for a customer's losses.
For most people, the best option is to have a general durable power of attorney because it gives your agent broad powers that will remain in effect if you lose the ability to handle your own finances. An attorney can customize a general POA to limit powers even more—or add powers, Berkley says.
Yes, joint ownership of an account overrides a Will. The joint ownership will be effective over and supersede any directions in your Last Will and Testament regarding a specific account and how those assets are divided.
Separate Accounts With Authorized Users. One alternative to a joint account is having separate accounts and authorizing each other to access and use the accounts as needed. This allows for some level of shared finances while maintaining individual control over separate accounts.
- Talk about money. ...
- Offer to assist your parents with monthly bill paying. ...
- Meet your parents' friends. ...
- Be present in your parents' lives. ...
- Notify your parents' bank. ...
- Carefully vet caregivers. ...
- Check credit reports regularly.
Survivors who believe they can access an account often find they cannot do so because of its ownership structure. The most important thing for family members and other heirs to know is that they should never forge the signature of the deceased to pay bills or use the person's ATM or debit card to get cash.
Estate Tax Consequences
If the surviving joint owner is not a spouse, then the fair market value of the entire account will be included in the decedent's estate. If the surviving joint owner is the surviving spouse, then only 50% of the fair market value is included in the value of the decedent's estate.
Banks freeze access to deceased accounts, such as savings or checking accounts, pending direction from an authorized court. Banks generally cannot close a deceased account until after the person's estate has gone through probate or has otherwise settled.
Money in joint accounts
However, a deceased person's share in joint property is treated as part of their estate for inheritance tax purposes, both on death and on gifts made during their lifetime.
How do I remove a deceased person's name from a joint bank account?
Joint accounts generally can be transferred into the sole name of the surviving account holder when we receive a certified copy of a death certificate and request to amend into the surviving account holder's name.
In this case, an executor or administrator must be appointed by a probate court to access the funds and close out all financial accounts. The executor must prove that the deceased owner has died and submit paperwork (Letters Testamentary, for example) to close the joint bank account.
The bank needs to be notified of the accountholder's passing as soon as possible, as any bank accounts of the deceased remain active until the bank is notified of the death. This typically entails providing the original Death Certificate for verification purposes and the Will, if one is available.
The executor named in the will can do this, or if no executor has been nominated, the administrator (main beneficiary). They'll contact the bank in question with proof of death to begin the process. The Death Certificate is typically accepted as proof.
In short, whether a spouse can (or should) empty a bank account before a divorce depends on many factors, one of which is whether the funds are clearly your separate, non-marital property, and whether the spouse can prove that in court.
