Avoiding Probate with Bank Accounts

Your assets may include a checking account, savings account, money market account, or certificate of deposit held at a bank.  There are several ways to keep these accounts out of probate.  If you want the person who is to receive the balance on the account to also be able to make deposits or withdrawals on the account during your lifetime, you can set it up as a survivorship account.  Typically the bank’s paperwork will say “John Doe and Jane Doe, either may draw, pay to survivor.”

If want a person to receive the funds upon your death but not to have access to your funds during your life, then the account can be set up as a Payable on Death account (POD).  The bank’s paperwork, and maybe your bank statement will say “Richard Roe POD Rikie Roe”.

Be careful when setting up a joint and survivor account whether a bank account, or one holding securities:

  • The other person on the account is treated as a co-owner.  If the person you named wants to clean out the account, he or she as the power to do so.  If the other person has creditor problems, you might find that your account, with your money in it has been attached to pay the other person’s bills.
  • If you want to give someone the ability to transact on your account but want to avoid that person’s creditors from being able to attach your account, use a Power of Attorney.  That way your money stays your own, and your agent’s creditors cannot reach your money.
  • If you have more than one person that you want to receive the proceeds of the account upon your death, make sure that each person is named as a beneficiary with a POD designation.  Too often, mom or dad will set up a bank account with one of their children as a joint and survivor account, to avoid probate and give the child the ability to transact on the account if “something happens”.  Legally, the child named on the account has no obligation to share the proceeds of the account with his or her siblings.  There may be a moral obligation, and most times the named beneficiary does share, but it there is no legal obligation to do so.
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