AS PART OF HER ESTATE PLAN SHOULD A WIDOW JOINTLY TITLE HER SAVINGS ACCOUNT WITH HER SON TO ENSURE HER BILLS ARE PAID?
We do not recommend adding the widow’s son as a joint owner of her savings account to ensure her bills are paid.
If she plans on adding her son as a joint owner of the account only for the sake of convenience to pay her bills, then a durable power of attorney would be more appropriate. This would allow her son to access her account to pay her bills even if she is not capable of doing so herself in the future. A power of attorney that provides restrictions on her son’s ability to make gifts would also ensure that her son does not have the right to give the money to himself. Finally, as a fiduciary, her son would be held to the highest standard of loyalty and could be held accountable for any misuse of his mother’s funds.
Under Pennsylvania law, if she adds her son as a joint owner of the account, he would be entitled to the entirety of the funds remaining in the account upon her passing. In Pennsylvania, a joint account in a bank or other financial institution is governed by the Multiple-Party Accounts Act. A “joint account” is defined as “an account payable on request to one or more of two or more parties whether or not mention is made of any right of survivorship.” By naming her son as a joint owner of the account, the widow would be giving her son the right to withdraw the funds in the account whenever he so chooses, even if not for her bills.
The Act further provides that when one of the parties to the account dies, the surviving party is entitled to any sum remaining on deposit even if the decedent’s will provides for a different distribution. This presumption can only be rebutted if there is clear and convincing evidence of a different intent at the time the account is created. Jointly titling her savings account with her son may conflict with the widow’s current estate plan if she plans to provide for her other children equally under her will. This is especially so if the savings account constitutes a significant portion of her estate.
Additionally, if she adds her son to the account as a joint owner, her son’s creditors could levy on the account to pay his bills or, if the son gets divorced while he is a joint owner, the son’s spouse could claim that she has rights to some of the funds in the account. This could have the effect of depriving the widow of the use of the funds if she is forced to go to court to show that the account was only re-titled for convenience and not as a gift.
Further problems could arise in the event the widow is predeceased by her son. In that event a joint bank account is taxable for Pennsylvania Inheritance Tax purposes even if the son’s name was added to the account as a matter of “convenience”. The mother as a lineal beneficiary would be taxed in Pennsylvania at a taxable rate of 4.5% on one-half (1/2) of the value of her own account at her son’s death. By executing a power of attorney instead of jointly titling the savings account, the account is not taxable for inheritance tax purposes should the son predecease his mother.
Filed Under: Estate Planning; Joint Ownership of Accounts
Please contact our Philadelphia Estate Planning Law Firm with your questions, comments or concerns.