Safe Guarding Your Bank & Credit Union Accounts

Published on January 17th, 2017

Safe Guarding Your Bank & Credit Union Accounts

When it comes to the steps that are taken to protect one’s funds in the event that they become deceased or disabled, everyone has slightly different goals while some don’t have any plans or goals at all. I see many accounts that have no joint owners or Payable on Death designation.  If you don’t instruct your financial institution how to handle your funds upon your death, you’re doing a disservice to your loved ones by holding up the process to access funds.

Depending on the size of the estate, it may have to go through Probate before any accounts can be disbursed.  That takes time and expense.  You have to go through the court system, you may need a lawyer, etc. Simply having a joint owner on your account may also not guarantee that your funds will be disbursed how you wish upon death.  Having a joint owner will allow your joint owner full access to the funds, so the funds will avoid Probate.

Because of this, it’s important for you to discuss with your financial institution(s) and your loved ones how you want your accounts handled in the event of an emergency. Tools are available to help.  Each has benefits and drawbacks.

First, with joint ownership, the benefit is that the joint owner has full access to the funds at all times. However, this can also be a drawback!  Your intention may be to only want them to access the funds in an emergency or if you pass away, but in reality, they can access the funds whenever they want.  Another drawback is that the joint owner is still legally able to access all the money in that account without having to disburse funds to intended heirs. If there are multiple heirs that you want the funds distributed to upon your death, the joint owner(s) have to willingly distribute those funds as they are not required to split up the funds.

Next, there is a Payable on Death designation.  This is a good tool to use if you don’t have a joint owner or if your joint owner is an “only” spouse (no 2nd marriages).  This turns your account into the equivalent to a “mini-trust”.  Upon your death or the death of both spouses, the funds are immediately payable to whoever has been designated.  The benefit is that you avoid Probate issues.  The downside is that if it’s a single owner account and you’re somehow disabled, there isn’t someone that can act on your behalf unless you have a Power of Attorney.

The Power of Attorney allows the person that you appoint to act on your behalf.  They’re allowed to do what you give them the authority to do.  The drawback to this is that you have to make sure that they’re only doing what you want them to do. I’ve seen this lead to fraud by caretakers that have taken advantage of the elderly.  Another downside is that Powers of Attorney expire upon death.  Therefore, if you don’t have plans for what happens to your funds upon your death, there will still be issue for any intended heirs.

There is no “one size fits all” solution. My recommendation is to have a talk among the people involved and to make decisions to what you want done depending on the different situations. Please be aware, all that I have written is based on how my financial institution interprets and enforces policies and regulations.  Because of this, it is very important to talk to your financial institution about what you want and what they can do.  For legal reasons, there may be limitations as to what the financial institution can do.

If you have any comments/questions, please write me at david.lukas@leydencu.org.

 

David Lukas

Leyden Credit Union

President/CEO


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