In addition to a Durable Power of Attorney for Finances, one way to help ensure that your bills will be paid and your bank account effectively managed if you become mentally incapacitated is to establish a multiple party account without right of survivorship. Also called a “convenience account,” this is a type of bank account that lets you designate a trusted friend or loved one to have access to the account, without making him or her a co-owner of the account.
This type of account is similar to a joint account, in that it provides a method for a trusted individual to make deposits into your account, withdraw funds, and write checks. However, it has some significant differences that can provide protection to you and avoid interference with the distribution of your estate when you pass away.
Unlike a joint account with right of survivorship, when you designate a loved one to have access to a convenience account, that person is added to your account as an agent. So, he or she is limited to using the account for your benefit. Since your agent is not a co-owner, he or she is not allowed to use the account funds for his or her own purposes. There are also no gift tax concerns, and your agent’s creditors cannot access the account in payment of his or her debts.
Plus, with no right of survivorship, the account will pass to your estate at your death, and be distributed according to the terms of your will. This avoids an often unexpected snag that comes along with traditional joint accounts. It’s easy to add an adult child or another loved one as a traditional joint account holder during your lifetime, without realizing that upon your death, that person will inherit your entire account. The effect of this is to divert the account funds away from any other beneficiaries named in your will.
Of course, even if you opt for a multiple party account without right of survivorship, you’ll still want to be sure to have an effective Durable Power of Attorney for Finances. This document allows you to appoint an agent to manage your financial affairs beyond your bank account.
Your estate planning attorney can help you determine whether this type of account is right for you, and help you establish a comprehensive plan for making sure you’re taken care of in the event that you become mentally incapacitated.
Stephen A. Mendel, Estate Planning Attorney
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