Many people incorporate joint accounts into their financial and estate plans in order to keep the account(s) out of probate. As a recent article explains, however, joint accounts can become problematic.
Joint accounts provide the account holders with a right of survivorship of the account. Essentially, a right of survivorship means that when one joint account holder passes on, the account automatically becomes the property of the surviving holder.
Although joint accounts are convenient and provide tax-savings for those who utilize them, having another person on an account causes a substantial reduction to the amount of control that a person can exercise over such an account. A person should only create a joint account if they know and trust the joint account holder. Moreover, it would be unwise to enter into a joint account with a person who is deeply in debt or unable to keep track of his or her checks and ATM withdrawals.
An alternative to the joint bank account is a payable on death “POD” account. A payable on death account allows you to designate a beneficiary of your bank account. Through a POD account, a person can still avoid probate while maintaining singular control of their bank account.
