Risks of Co-ownership May Defeat Estate Plan There’s a Better Way

Co-ownership of any asset, sometimes Sometimes seniors intend that the The same convenience of having a child called joint tenancy, comes with risks. contents of a bank account or certificate as a co-owner of a bank account can be When you put your child’s name on a of deposit be distributed equally among achieved with less risk. A senior can give bank account, you are making a current their heirs. But if a child is a co-owner of a child lifetime access to the bank account gift of the contents of that account to the the account, that child will own the entire through a durable power of attorney, then child. First, your child could withdraw all account on the senior’s death and the have the account pass to whom the senior of the money in the account and use it for account will not be divided among the chooses through a beneficiary or “pay on personal purposes (such as a trip to Las heirs. For example, Ms. Martin has a death” designation. Vegas). certificate of deposit for $20,000. She wants it to be divided equally among her A durable power of attorney allows you Second, the money in the bank account four children. She even drafts a will to assign your powers to someone else. could be used to pay the debts of the which divides all her assets equally “Durable” means the power continues child. For example, if your child does not among her children. But for convenience, even if you become incapacitated. If you manage money well and has excessive she puts her eldest daughter’s name on execute a durable power of attorney, charge card debt, the creditors may come the account as co-owner. When Ms. effective immediately, which authorizes and want to use your bank account to Martin passes away, the eldest daughter your child to access your bank account, settle the debt. will be the sole owner of the certificate of the child can manage the money for you. deposit. The three younger children will The benefit is that with the durable power Even if your child manages money very not receive the share Ms. Martin wanted of attorney the child does not own the well, if the child were sued, money from them to have. account. The child is merely your agent, your account might be used to pay sort of like your right hand. The child’s damages. For example, if your child ran a Some Seniors Accept the Risk creditors and spouse have no access to red light and caused extensive damages, your account. the injured party might successfully sue Despite the risks and shortcomings of co- and garnish the contents of the account to ownership of a bank account, some By making a beneficiary designation on help pay for the damages your child seniors still put a child’s name on the the account, you can direct the bank to caused. account. They say that liability is limited pay it to specific people after your death. to the amount in the account, and they In New Mexico, this is called a “pay on And if your child is married and later would like the child to have the contents death” or “POD” designation. You can divorces, the child’s spouse might claim a of the account anyway. However, the have the bank pay the contents of the community property interest in the same result can be achieved without the account to all of your children, or to a account. risks of co-ownership. friend or grandchild. The account need not automatically pass to the child you authorized to help you manage the account with the durable power of attorney.

But POD Accounts Still Do Not Pass

Through Will

An account with a pay on death beneficiary passes to the named PUTTING A CHILD’S beneficiary upon your death. If you have NAME ON YOUR a conflicting provision in your will, the BANK ACCOUNT – POD designation prevails. You should be sure to keep your POD designation THERE’ S consistent with your will or other estate A BETTER WAY planning tool.

SENIOR CITIZENS’ LAW OFFICE

4317 Lead SE, Suite A

Albuquerque, NM 87108 (505) 265-2300

www.sclonm.org

Seniors sometimes make a child co-owner

The Senior Citizens’ Law Office is funded in of a bank account for convenience, so that part by the City of Albuquerque Area Agency on the child can access the account on the Aging, Bernalillo County grant, State of New senior’s behalf if she is ever ill or out of Mexico’s the Civil Legal Services Commission town. Co-ownership is effective, but (CLS), State Bar Pro Hac Vice grant, McCune comes with risks. The same result can be Charitable Foundation, and United Way of Central New Mexico. accomplished with less risk by using a

durable power of attorney and a 6/09 beneficiary designation.