As a loved one ages and no longer wants—or is able—to manage their own finances, a common solution is to accompany them to the bank and add them to their accounts for convenience. However, in practice, the individual is often added not just as a signatory but as a joint owner—a small distinction with big legal consequences. That single action can unravel an otherwise carefully crafted estate plan.
Planning Pitfalls: The Potential Danger of Jointly Owned Accounts
Under Ohio law, a bank account titled jointly with right of survivorship automatically transfers full ownership to the surviving owner when the other passes away—regardless of what the decedent’s will may say.
Imagine an adult child is added to a parent’s account to “help with bills.” When the parent passes, their will directs the estate to be split equally among all children. But if that account is jointly owned, it bypasses the will entirely. The surviving account owner—now the sole legal owner—has no obligation to share the funds. Any gifts made to siblings from that account may have gift tax consequences and potentially impact the surviving child’s own estate plan.
Right of Survivorship: A Key Legal Implication
The issues don’t end there. Joint ownership means all owners have equal and unrestricted access to the funds. That access applies immediately, regardless of any family understanding about how the account should be used.
If the child added to the account struggles with finances, or is subject to creditor claims or legal judgments, the funds may be vulnerable. Additionally, use of the account by someone who didn’t contribute the funds may be treated as a taxable gift if it exceeds the annual exclusion. Joint ownership may also complicate eligibility for government benefits such as Supplemental Security Income or Medicaid.
A Better Solution: Power of Attorney
In most situations, naming a child or other trusted person as an agent under a power of attorney is a safer alternative. It grants authority to manage funds on behalf of the account holder, without giving ownership rights or interfering with the account’s role in an estate plan. With proper planning and guidance from your financial institution, the correct structure can avoid the unintended consequences of joint ownership.
Plan Thoughtfully and Review Regularly
Even well-intentioned decisions can create problems down the road if not aligned with your broader estate and tax planning goals. If you’re unsure about how your accounts are titled or align with your estate plan, speak with your attorney at Carlile Patchen & Murphy or a member of our Family Wealth & Estate Planning Group. We’re here to help ensure your intentions are preserved.
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