Ep. 14 - Bank Accounts and Your Estate Plan
Welcome to the Good Steward Law and Wealth Podcast, where we explore strategies to protect and manage your wealth with the utmost care and responsibility. In today’s episode, we’re diving into an essential topic—how to manage your bank accounts to ensure they’re handled smoothly during incapacity and after your passing. We’ll discuss the best ways to ensure your accounts are accessible when needed, how to pass them on outside of probate, and why naming your child as a joint owner might not be the best solution. Tune in as we break down these crucial steps for securing your financial legacy while being a good steward of your wealth.
IN THIS EPISODE:
- [0:27] Let’s talk about bank accounts and protecting them in your estate plan
- [1:48] Keeping your bank account out of probate
- [4:59] Why naming a beneficiary is the preferred way of protecting your bank account
- [7:07] Naming a trust as beneficiary
- [8:55] Do not name your child as joint owner of your bank account
KEY TAKEAWAYS:
- Avoid Naming Your Child as a Joint Owner: While it may seem convenient, naming a child as a joint owner of your bank account can expose your assets to creditors, lawsuits, or even divorce settlements. It also gives them unrestricted access to the account, which could lead to unintended financial consequences.
- Instead Of Adding A Child As A Joint Owner, Appoint Them As Your Power Of Attorney. This allows them to manage your bank account if you become incapacitated, ensuring your bills and medical expenses are paid without exposing the account to their risks.
- Designate A Beneficiary To Avoid Probate: To ensure your bank account passes smoothly to your heirs without going through probate, designate a beneficiary on the account. This can be done through a Transfer on Death (TOD) designation, allowing the account to transfer directly to the beneficiary upon death and avoiding court involvement.
RESOURCES:
ABOUT THE HOST:
Attorney Ledly Jennings, founder of L. Jennings Law, specializes in protecting legacies and ensuring smooth transitions of personal and business assets. With offices in Arkansas, his firm offers expertise in estate planning, elder law, probate, and business planning. With a J.D. and MBA, plus valuable experience at Stephens, Inc., the state's largest investment bank, Ledly serves high-net-worth clients and family businesses statewide.
Transcript
to the Good Steward Law Wealth Podcast, where host Ledley Jennings explores law and finance to help listeners become better stewards of their wealth. Each episode covers the latest trends and strategies in estate planning, elder law, investment, and wealth management. Tune in for the knowledge and tools for financial success and security.
Welcome
Ledly Jenings: to the Good Steward Law Wealth Podcast. Glad to be here today. Today, we are going to talk about something that everyone has. Um, we're going to talk about bank accounts and how you pass on your bank accounts in your estate plan. Uh, what's the best way to do that. So to start out, most people have a bank account today.
s, CDs, really anything at a [:Um, the main thing I look at when I start talking about bank accounts is how do we make sure one, somebody has access to that account if you were incapacitated. So if you are in the hospital, you know, your bills still need to be paid from that account, or even if you're in the nursing home and you can't get out to manage your own affairs, that's fine.
Someone needs to be able to access that account. So that's the first thing we look at. The second thing we look at is how do you pass it on outside of probate? So if you pass away, we don't want your bank account to be stuck in the court system. We want it to go directly to who you want it to go to. So let's start there.
on the account who can sign [:Husband passes away. It's automatically the wife's no court involvement. Um, the next way it passes on is with a beneficiary designation. So some banks call it transfer on death or TOD. Uh, some call it just naming a beneficiary, but basically you have to name someone as your beneficiary on that account.
And then it passes outside of probate. Uh, the third way is if that account is owned by a trust or in a trust. Then it passes to the trust outside of probate. So those are the three ways you can do that. But what are the pros and cons of each, each method? Well, the first one we mentioned is a joint owner.
t know how this got started, [:It achieves certain purposes and accomplishes goals, but it's not the best method. And here at the good steward law and wealth podcast, we all, we want to be the best steward of our assets and naming them as a joint owner is not the best method. So why do people name them as a joint owner? Well, one. Your kids would then have access to the bank account if you're incapacitated.
So you're in the hospital, the nursing home, then they can sign checks. They can do what they need to with that account. Um, so it achieves that goal. And the second is it avoids probate. You know, if they're a joint owner, just like a husband and wife, if you pass away, whoever's on that account with you, it goes directly to them.
t do that? Well, there are a [:It's just as much yours as it is theirs. They can write checks out of it. They can take the money and run, you know, it is their account, just like it is yours. And then, you know, a lot of. People say, well, I trust my kid. They wouldn't take all the money and run, right? They may not, but things out of their control could access that account.
Meaning if they're a joint owner, their creditors become your creditors. So if they are sued for any reason, they have creditors, something like that, that bank account is considered their assets. So it's open to their, um, creditors. So things outside of their control, even divorce, it could be open to their divorce.
an joint owners. So the best [:They, it just goes directly to them when you pass away. How do they access your account if you're incapacitated, if they're not a joint owner? Well, that is what the power of attorney is for. So you name your kids and give them power of attorney. They can then use that bank account the same way you would want them to.
They can write checks. They can pay your medical bills. They can make sure you're provided for while you're in the hospital or the nursing home. But it's not open to their creditors. That's the benefit of a power of attorney. So a proper estate plan names your kids as power of attorney. Therefore they can use the bank account for your benefit.
instead of making your kids [:To inherit the account. And then he knows that he is supposed to split that account with his sibling or with his, the grandkids, whoever it is. Now that's a bad method because as soon as your son, if your son's name is beneficiary, when he inherits that account, it's his account. He can do whatever he wants to with it.
it evenly between your kids, [:But another method is. Name a trust as a beneficiary, and then within the trust, you can control what happens to the account in any manner possible. I'll use one example to kind of bring this point home. Let's say you have a savings account with a couple hundred thousand dollars in it. You know, it's your safety net, you've built it up.
You're not accessing this account, but it's there in case you need it. In your retirement. So what do you want to have happen with that account? Well, the intention for that account on a lot of people is to make sure their funeral is paid for, their bills are paid for, you know, their heirs don't have to pay for anything out of pocket.
f an account is you make the [:They can immediately access it to pay for your funeral, to pay for your medical expenses. And then they follow your instructions of let's say you wanted to provide for your grandkids school. They can then take that account. As trustee can set up five 29s for your, uh, grandkids or whatever account they deem appropriate for their school.
So within the trust, if you leave your bank account to a trust, they can do whatever they want to with it. Meaning they have to follow your instructions of the trust. So, um, whatever you want to have happen is put into writing. It's not left out there unknown, and it's not open to creditors. To divorce, to anything of your kids.
rom this call is do not name [:And that is the best solution. And that's what we're all about here is doing the best solution. So this is another episode of the good steward law and wealth podcast, where we believe that everything is a gift and it's our job to do the best with what we've been given by being good stewards of our wealth.
Thank you for listening.
Narrator: Thank you for tuning in to the Good Steward Law Wealth podcast. If you're ready to take control of your financial future, visit GoodStewardFirm. com to book a meeting and sign up for our newsletter.
