How You Establish Your Bank Accounts Matters

Make Sure Your Accounts Are Properly Titled

Bank accounts can be titled in many different ways. You need to be careful how you title your accounts to ensure consistency with your estate plan.

First, you can title your account in your name only, which means that only you can take money out of the account. Upon your death, the account becomes part of your probate estate and is distributed according to your Will.

Second, you can title your account jointly with another person. In that case, either you or the other person can take money from the account. Upon your death, the account will become the property of the other person if you designated the account as passing to the other person pursuant to a right of survivorship. Accounts of this type are sometimes titled “JTWROS”, which stands for joint tenants with right of survivorship. One benefit of this type of account is that it gives the surviving owner immediate access to the funds so they can be utilized for immediate expenses after the death of the first owner.

Third, you can title your account jointly but without a right of survivorship. Upon either owner’s death, one half of the proceeds belong to the deceased owner’s estate, and one half to the surviving owner.

Fourth, a second person can be added to an account “for the convenience” of the current account holder. This allows the person to assist you with paying your bills and general banking. The account remains your sole property, and upon your death, the account becomes part of your probate estate and is distributed according to your Will.

Fifth, you can title your account “POD” (payable on death), or “ITF” (in trust for) another person. During your life, the account remains in your sole control, but upon your death, the account is transferred to the designated person. You may close or change the account at any time, and the other person has no rights to the account during your lifetime.

Sixth, you can establish a “Uniform Transfers to Minors Act” (UTMA) account for a minor, with yourself or another person as Custodian. These funds must be used by the Custodian for the minor’s benefit during the minor’s lifetime, and when the minor reaches 18 or 21 (you decide which), the funds are distributed to the minor as his or her sole property. The UTMA statute provides a useful way to leave money to a minor outside of your probate estate.

Since there are so many ways you can title your bank accounts, it is important to make sure your accounts are titled consistent with your estate plan. If you have questions or need assistance in reviewing your accounts, you may contact our estate planning attorneys to discuss options that best meet your needs.