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Should you use joint tenancy accounts for incapacity planning?

On Behalf of | Aug 27, 2021 | Estate Administration

Incapacity planning is an important part of estate planning for all New Jersey residents. Some people try to accomplish this in the easiest way possible when it comes to their bank and investment accounts. Having a joint tenancy account is one way to ensure that you can access your money for bills should you become incapacitated, but is it right for you?

Joint tenancy accounts can cause problems

When opening a new savings or investment account, advisors often ask if you want to name a co-owner, frequently pointing out that having a joint tenant is a safe option for older individuals. It sounded like a good idea, so you named one of your children as the joint tenant. Perhaps the biggest problem is that when you pass, the assets in that account pass directly to the co-owner. Even if you have created a will as part of estate planning, only the co-owner would inherit that account as the ownership documents supersede your will. Others heirs would be excluded.

Other problems can occur too. Do you fully trust your co-owner? Co-ownership doesn’t preclude poor judgment as anyone with access to the account could use it for their own purposes instead of yours. If your co-owner has financial problems, creditors may also have access to the account to pay debts.

A better way to plan

Consider the big picture when planning your estate. Documents such as power of attorney for finances may be a more appropriate solution. Keeping a limited amount of funds in a joint account for quick access may make sense for emergency purposes. However, if you want to ensure that your heirs receive equitable treatment, utilizing a variety of trusts may also be more appropriate as you can structure them in various ways to protect your assets.