Avoiding Probate with a Joint Bank Account
The word “probate” is related to “proof,” and simply means the process of proving that a will is valid and that assets are properly distributed by law. Probate is overseen by a public probate court, which means there are court fees, attorneys’ fees (which includes costs from a mountain of secretarial work and postage expenses), appraisers’ fees, executor’s fees, and more.
However, some property can be easily transferred to another person at the death of the “decedent,” thus avoiding all of these fees. A jointly-owned account in the names of two or more people can be designated “joint tenancy with right of survivorship.” Setting it up is easy – banks provide slips to add a name to the account, which will include a check box indicating a right of survivorship. Upon the death of one account owner, the other owners will continue to own the account after showing the bank manager the decedent’s death certificate.
However, there are some issues to be concerned with. Joint owners are subject to lawsuit judgments against any other owner. Therefore, joint owners need to keep in contact and trust one another.
For tax purposes, an owner of an account should not add other “owners” to the account right before he or she dies, or else those other owners will be deemed to have received a gift. The decedent’s estate would then have to pay gift tax on any amount greater than $12,000. Furthermore, all “owners” should make deposits into the account to be true owners and avoid the gift tax.
The primary joint owner should be careful not to tick the box granting a right of survivorship if all she wants to do is to have one of her daughters help her manage the account, make withdrawals for her, etc. Ticking the box in this case would grant the whole account to one daughter, making the will worthless to the other children and potential heirs.
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Last Modified: 08-20-2008 04:40 PM PDT
