Avoiding Probate with a Joint Bank Account

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What Is Probate Court?

When somebody dies without a will, their assets must go through probate court. If a will is contested, the will’s division of the assets must go through probate court.

Since probate is overseen by a public court, there are court fees, attorneys’ fees, appraisers’ fees, executor’s fees, and more. Due to these various expenses, you may wish to avoid probate court whenever possible.

How Can I Avoid Probate Court with a Joint Bank Account?

Some property can easily be transferred to another person at the death of the “decedent,” thus avoiding all of these fees. A joint bank account in the names of two or more people can be designated “joint tenancy with right of survivorship.” Setting up a joint account is easy:

However, be aware that joint owners are subject to lawsuit judgments against any other owner. Therefore, joint owners need to keep in contact and trust one another.

Probate Court and Tax Issues

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.

Right of Survivorship

When filling out the paperwork for a joint bank account, the primary joint owner should be careful not to tick the box granting a right of survivorship if all she wants to do is, for example, 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.

Do I Need a Lawyer for Probate Issues?

The probate process can be highly complex, time consuming, and expensive. To avoid potential issues with probate, you should consult with an experienced estate planning attorney. An attorney can help you set up a valid will and can help you understand how joint bank accounts and other legal instruments can be used to avoid probate.

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Last Modified: 08-25-2014 06:01 PM PDT

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