Berge & Berge, LLP Blog

Tuesday, May 19, 2015

Joint Tenancy in Estate Planning: When (and How) to Avoid an Unintended Override

I am considering adding my daughter to my checking and savings accounts. Is this a good idea? 

Joint tenancy is a legal term referring to the situation in which two or more individuals share an undivided ownership interest in an asset or piece of property. The situation is extremely common between spouses or domestic partners, as it creates a seamless transition of property to the other upon the death of the first. However, joint tenancy is not always as convenient as it seems, and it can actually lead to the override of a well-intentioned, carefully-considered estate plan. If you are considering joint tenancy for the sake of convenience, we encourage you to read on before taking this step – there may be more to it than you realize. 

Joint ownership of financial accounts

For many, the thought of managing daily and monthly personal finances proves exceptionally overwhelming, prompting the decision to add a significant other, child or close friend to an account. By virtue of being added to the account, this individual gains all the administrative rights of the original owner, including the ability to write checks, make deposits, and initiate withdrawals. This person will also gain outright ownership of the account upon the death or incapacity of the original owner, despite the language of that owner’s will or living trust. In other words, joint tenancy over checking and savings accounts – which can grow to a considerable size with income from one’s pension and retirement accounts – will override one’s intentions in an estate plan, and there is little that can be done to undo this arrangement. 

For anyone struggling with upkeep of personal finances, one alternative to joint tenancy is a simple durable power of attorney for finances. This document will allow a trusted friend or relative to make transactions on behalf of the account holder without actually undoing his or her predetermined estate plan. 

If you have additional questions about the effects of joint tenancy on financial assets or real property, please do not hesitate to contact the estate planning attorneys at the Law Offices of Berge & Berge, LLP today by dialing (408)985-9918. 

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