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Trouble with Joint Accounts and Some Help

It is common in our work when we are discussing the terms of a Will or Trust with a client, and especially when we are meeting with an unmarried client with children, to be asked whether they should “put the name of my child on the bank account” or something to that effect.   When asked why they want to do this, we often hear they have been told by friends this is a smart thing to do to avoid probate, and so the child can help manage the account as the parent ages and has more trouble managing things.

If the goal is to allow a child to manage an account to help a parent, we feel a better and safer way to enable this is to give the child a power of attorney, rather than making them a co owner of the account.

Although for accounts with never more than very small balances, one might say well what can be the harm?   Unfortunately we see the use of joint accounts cause real harm with some frequency.

Under Connecticut law, generally speaking, any joint owner can go to the bank or financial institution at any time, and withdraw the funds or draw on them.   (Note, a creditor of either joint owner may obtain a lien on the account for the debt of one joint owner!)  And while any living co owner may learn of the situation and try to take appropriate steps, after the death of a joint owner the surviving joint owner is presumed to own all the funds in the account, and may do with them as they please, without regard to what any person’s Will or Trust may say.

A recently adopted Connecticut law (now part of Connecticut General Statute 36a-290) gives the executor of an estate more of a leg to stand on if they believe the surviving co owner was not meant to take ownership of the account in question at the death of the other co-owner, but rather the account should be an asset of the estate.   The revised statute requires the executor in such a case to establish by a “preponderance of the evidence” the intent was not that the surviving joint owner would own the account.   The old standard was the executor must prove the case by “clear and convincing evidence” which is a heightened standard and very difficult.   So this may offer some benefit to an executor when Dad adds one child to an account intending they may help him manage things as he ages (“for convenience only”), but without the intent that the child own the account at his death.     Although proving these things can be very difficult.   And setting accounts up in this manner often leads to bad blood among the children, where only one child takes the account.

But in some cases the new standard of proof may not be much help.   Joint accounts for spouses are very common.   If a married couple owns an account jointly and then divorces, the intent when the account was established was likely that the surviving party would own the account at the death of one of the spouses, and if the ex spouses fail to change the ownership of the account, unintended consequences may occur, as the saying goes.

Couples that are not married, need to be especially well informed and vigilant in how they set accounts up.

One needs to be careful.

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