What Does It Mean To Be On A Bank Account?

When we meet with clients, often one of the first things we need to review is the client’s assets and how they are owned. This is true for estate planning clients as well as elder law and estate/trust administration clients. One of the most misunderstood assets is the checking account (although the following could apply to any kind of financial account.)

The most common response to, “How do you own your checking account?” is something like, “My daughter/son is on the account with me.” The child’s name may even be printed on the checks. (Names on checks do not constitute ownership.) Being “on” someone’s bank account doesn’t really answer the question, though.

Throughout the following examples, I will refer to Parent and Child, but it could be any two adult individuals.

Example 1: Child can be “on” Parent’s bank account as a co-signer. This means that they can sign checks and transact business on the account. It is an agency relationship, similar to a power of attorney. However, upon the death of Parent, the child’s legal right to sign checks or transact business on the account stops. This is the same as a power of attorney. When the Parent dies, the power dies with them. In this situation, the account is owned solely by the Parent and the child is a “signer”.

Example 2: Another way Child can be “on” a bank account is as a co-owner. The most common form of co-ownership on a bank account is as joint tenants with right of survivorship. Again, both Parent and Child have access to the account, can write checks on the account, draw all of the funds out of the account, etc. But upon the death of Parent, the account still belongs to Child because they are the surviving owner.

Example 3: A third way someone can be “on” a bank account is as a POD (pay on death) beneficiary. In this situation, Parent owns the account and Child is a beneficiary which means Child has no rights with respect to the account while Parent is living, but upon Parent’s death, the account belongs to Child.

If Parent’s bank account is owned as in Example 1, they may want to consider adding a POD beneficiary, even if the beneficiary is the same Child who is the signer.

In our experience, when Parent puts Child “on” their bank account, the bank representative automatically makes it a joint account (Example 2 above). When we explain to the client (Parent) that their account will belong only to that Child upon Parent’s death, they are shocked to hear that Child will have no obligation to follow the terms of Parent’s Will or share with siblings, or whatever else the Parent intended. That was certainly not what they intended!

So if you don’t know who is “on” your bank accounts, ask the Bank to show you a copy of the signature card. It will indicate if the account is JTWROS (joint tenants with right of survivorship), or Child is a signer, or Child is a POD beneficiary. This can be very important. Sure, avoiding probate is usually a good thing (Examples 2 and 3 would avoid probate of the account), but getting your account to the individual(s) you want it to go to upon your death is even more important.

If you have already done your estate planning and you would just like to have it reviewed to be sure your property is going where you think it is upon your death, give us a call and we’d be happy to help.