Effect of Multiple Names on Bank Account

Question

Background: I learned recently that multiple account holders on a bank account keep that account out of probate if one person dies. Or, in other words, if one person dies then the other account holders (such as children) keep the account funds–creditors have no claim.

Note: I saw a news story today where a state was going after a couple's assets (home, accounts, etc.) to cover a fine. A huge fine for a relatively benign offense I add as an aside.

Theoretical question: If I put my children's names on my accounts (savings, checking, etc.), then later authorities fine me for something, and I did not pay the fine, could the account funds be seized by authorities? Or are they treated in the same way as an estate (such as held by the children)?

(I emphasize: theoretical Q, but I'm estate planning, and this is of interest to me.)

Answer 1

You are talking about "joint tenancy." I am familiar with bank accounts having multiple owners characterized as "Joint tenants with rights of survivorship" (JTWROS). This keeps the account out of probate: a death certificate simply removes the name of any owner who dies. But a probate court afraid that a deceased may not have enough assets to satisfy debts can still freeze the account for the duration of probate.

These really are not tools for estate planning. For example, you can't use them to avoid gift or estate taxes. Also a JTWROS account is fully exposed to the liability/creditors of every owner. So no, a JTWROS does not shield assets from creditors. Finally, encumbrance of or distribution from a JTWROS account requires the consent of every owner. Any unresolved disputes are probably headed to court.