Think Twice about Joint Accounts

In my many years at the bank there hasn’t been a month that went by where someone wanted to make an account joint with their children or with a trusted family member. Often times these choices are prompted by self reflection when certain life changing events occur in people’s lives. The most prevalent of these events that propel individuals to change account structure is usually when a spouse dies or when that individual becomes ill or disabled. It is natural for all of us to want to tie up loose ends in our finances and figure out the most convenient way to deal with our day to day expenses. What may seem as convenient and easy, often times causes future implications.

Think twice about Joint Accounts

When I discuss the issues that can result in making assets joint, clients are often shocked by all the possibilities that can arise. Creating joint investment and bank accounts should come with the same legal and taxadvice and guidance by a trusted legal and accounting professional as it does with ownership changes in business and real estate transactions. The fact of the matter though is that most joint accounts are openedby individuals without independent legal or tax advice or even without the guidance of a qualified financial planner.

This doesn’t mean that changing ownership structure to a joint account is not the right solution; it just means that you should understand the different legal and tax implications that could arise before making this change. Each person’s financial picture can be widely different from the next and therefore a qualified legal and tax professional should give you the right guidance on a myriad of different solutions before you ever make these changes. Our process as financial planning experts is to truly get at the heart of your intentions and figure out if they are aligning with your estate and other goals. A financial and estate plan will identify these gaps that will allow us to direct you to the right professional for advice. Knowing the issues is half the battle and understanding how these changesimpact your intentions can provide peace of mind for you and your family.

In my 15 years as a financial planner, banker and investment advisor I have had the experience of seeing most of the impacts that have arisen from joint accounts. In sharing these particular situations I want to raise awareness to how important it is to have a proper financial planning consultation before you make decisions on changing ownership.

Situation one

A recent widow had made one child joint with right of survivorship on her bank accounts. She had two other children but entrusted this child with the responsibility of dividing her money up equally between the other children in case of her death. She did this because her friend told her that she would pay about $5,000.00 in probate costs if it had ran throughthe direction of her Will. The family was aware but trusted that the outcome would be followed according to her direction. She died suddenly and the joint investment moved completely to the one child. This child received the funds as the remaining sole owner when proof of death was provided to the financial institution. The child had ran into financial difficulty and decided to pay off his debts leaving very little to divide equally among the remaining children. The entire family is now in dispute and stuck in court over the legal battle over those original assets. The legal costs have now far exceeded the original $5,000.00 probate savings.

Situation Two

A widowed father put his two daughters as joint owners on his entire cash savings in the bank. He was figuring that if something would happen to him that his two remaining daughters would split the money equally anyway, avoid probate and leave the decision to them how they would enjoy his nest egg. His one daughter was married and had two children of her own while the other daughter had one child but divorced. On the surface this may be a pretty solid plan. Unfortunately, he was travelling in a car with the one daughter that is married and they ended up in a serious head on collision. They were both rushed to the hospital and the father died on the way and the daughter died two days later. When the remaining daughter went to the bank and upon proof of death of her sister and father, the entire savings went to her name only. The widowed husband found out two years later and argued on behalf of their children that the father intended to distribute equally to each family household and not per remaining child. The remaining daughter argued that her father intended for her to get the proceeds if her sister had died. His Will indicated per family unit but she is arguing that he had changed his mind and circumvented his own Will. Legal costs are in excess of $50,000 for both parties.

Situation Three

A grandmother decided to give her grandson joint ownership onone of her savings accounts at the bank. She figured that this was going to him anyway at her passing and she had set up separate accounts with eachof her four grandchildren anyways to make it equal. She was diagnosed with theeffects of Alzheimerssometime thereafter. Around this time the grandchild had found the account on his online banking page and began to withdrawal the money. No one in the family knew it but over the course of the year he was gambling the money away. By the time someone figured it out the money had been gone and the addiction was in its severest form.

Situation Four

A manin a long term second marriage with children from his first marriage recently received a very large inheritance from his father and was given these proceeds in his own name as directed by his father’s estate. He invested it under his own name but later on began suffering from a medical disability. He decided to change to joint ownership of his investments with his wifeand allow her to manage his financial affairs. Over the next few monthshowever she basically managed and controlled his entire finances. After some time passed she filed for separation and claimed the right to these particular joint assets that came from his father’s estate. His children are still in court fighting and claiming that their father did not have mental capacity to understand the ramifications of the change in ownership. The spouse is claiming that he was fully aware of his intentions. His LastWill and Testament would have beendivided with these particular assets going to his remaining two children. Legal fees are in excess of $100,000.00 on both sides with many months of court ahead of them both.

Situation Five

A widowed mother living with her 35 year old unmarried son and decided to give him joint ownership over her GIC’s. In most cases this might be perfect for joint ownership since he was named sole beneficiary of her estate anyway. She knew he was doing some drugs but what she didn’t know is that he was a severe drug addict. When she died he received all the funds and he quickly blew through all the money in less than a year and then died from an overdose. The proper planning and right soul searching could have had the funds go into a trust to help prevent his death or even help rehabilitate her son.

For many people, changing ownership to Joint is done out of good intentions but what happens thereafter could completely fall out of your control. Trying to avoid the minimal cost of probate could end up costing your family and estate thousands more and unforeseen consequences that you couldn’t even imagine. If you have joint accounts or are thinking of setting them up for whatever reason come and talk to us first. We will uncover all your possible scenarios and align your true intentions with the right advice and solutions.

Photo Credit: Christine und David Schmitt


Jason Polsinelli

Jason Polsinelli

Jason, head of the Polsinelli Financial Advisory Group, has worked in the financial services industry for more than 15 years and has been recognized as one of the industry’s leading financial planners. He graduated from York University in 1994 specializing in International Political Economy, followed by an MBA at Dalhousie University