I want to leave my bank accounts to my children when I’m gone. Can’t I just make the children joint owners? I hear this all the time.
That idea sounds better than it is. Yes, your kids would avoid court proceedings when you pass. But you might put yourself at risk at a time when you might need your money yourself. Your accounts would be exposed to your children’s divorcing spouses, bankruptcy, liability for legal actions (e.g., an auto accident), or your children could simply spend your money without your permission.
The best way to resist temptation is to avoid the opportunity in the first place.
While you are alive, it is essential to designate a person you trust to pay your bills when you can’t do that yourself. With a comprehensive power of attorney document, your trusted person can take care of your finances when you aren’t able. I recommend avoiding downloadable internet versions. You don’t want banks and insurance companies rejecting your document as insufficient when you most need it!
Then, for when you pass, make your bank account “payable on death” (POD). You remain sole owner of your account during your lifetime. Then, when the time comes, the POD designation is a simple and no-cost way to leave your money to your heirs.
Just gather your heirs’ contact information, Social Security numbers, and birth dates. Then visit the bank, ask for their POD forms, and fill them in with the people or charities to whom you would like to leave your money. Tell your heirs what you are doing, and where your accounts are located, so they will know to come forward to claim the money at the appropriate time.
If your power of attorney is powerful and detailed enough, you can be confident that your trusted person will be able to take care of your finances if you become disabled. For when you pass, you will have your POD in place to transfer your money to your heirs at that time. There will be no fees, no court costs, and your accounts are covered. That’s a much better plan than a joint account. You can also transfer your accounts to a revocable living trust that you have created.
For help with your planning needs, please give me a call. Sometimes what seems like the easiest solution isn’t the best solution to meet your goals and objectives.