Changing your bank account into a Joint-Ownership account with your daughter or making her the account’s Payable-On-Death beneficiary avoids probate, but these are different tools addressing different situations and goals.
First, think through whether avoiding probate is a wise decision for you. Pennsylvania law makes forming protective trusts for your children in your will rather easy and inexpensive. After your death, these trusts protect the money from your children’s spouses, creditors and future taxes. If you use a Joint Account or Payable-On-Death Designation to give the account directly to your daughter, these funds will now be unprotected from her spouse and creditors. If you think protecting your daughter’s inheritance from her creditors and spouse is a good idea, then contact me and we can talk about the value of a protective Pennsylvania dynasty trust.
If protecting the funds from your daughter’s spouse and creditors is not important, then a Joint Account or Payable-On-Death Designation might be a great idea, but they are certainly different tools.
Jointly Owned Accounts:
By making your account “Joint”, you are giving your daughter a current ownership interest in the account. Your daughter has the right to take all the funds from the account whenever she wishes and, at your death, she has the legal right to claim the entire account by “right of survivorship”. She does not need to file your will with the Montgomery County Register of Wills, but instead she can simply empty the account because at your death she is seen to take the whole account by contractual agreement with you.
Joint ownership is simple, but it can cause problems. If during your lifetime your daughter has creditor problems or get divorced, the account is seen as partially owned by her. Your account is now dragged into your daughter’s legal problems. Further, if you want your account divided equally between your children, your daughter has no legal obligation to share this account. Often parents will make accounts “joint” for “convenience”. The parent only wants the child to help manage the money and pay bills. Unfortunately, the parent is not told that what they have really done is given the one child the right to take the entire account and not share with siblings. This can end up in the Montgomery County Orphans’ Court where you children dispute whether the account was for convenience or not.
Unlike a Joint Ownership, by making your account “Payable-on-Death” to your daughter, you keep the ownership of your account in your name during your lifetime. Your daughter will only get the account at your death, hence the name “payable-on-death”.
If your goal is to give this account only to your daughter, then a Payable on Death Account is a more definitive tool. Your other children will find it more difficult to argue that your goal was not to give your daughter ownership after your death.
To claim the account, your daughter need only bring you death certificate to the bank. The bank will then turn the account over to her without the need of involving the Montgomery County Register of Wills.
If your goal is to allow your daughter to help you with paying bills and managing the account, a Payable-On-Death Designation will not help you. You can, though, give her check writing powers or give her a power of attorney over the account. Either technique will allow her to help you manage the account, but not expose your account to your daughter’s legal and marital problems.
If you have questions about avoiding Probate in Montgomery County Pennsylvania, feel free to contact our office for a free consultation.
Wills, Trusts and Estates, It’s all we do!
Peter Klenk, Esq