Joint bank accounts on death

[alanthompson@windstr]

I live in New York State and remember that years ago, a joint checking account was frozen on the death of either party until it went to probate. I also rember hearing that legislation was enacted prohibiting that action. What is the current status?

In my state we still used it after the death of the other party.

So I assume that that was permitted??

Your local probate court clerk would also know most likely if you dont get an exact answer here.

Here is our situaton in NC--


Q: Although my father has a will, he recently expressed concern about the headaches and expense of probate. To avoid some of these problems, he proposed naming me as joint owner of his checking account. He claimed that when my mother died, the assets held jointly by the two of them avoided probate altogether, which saved time and money. Do you agree with him?

A: If your father names you as joint owner of his checking account, he could inadvertently and unnecessarily complicate his estate plan rather than simplify it. His proposal would not necessarily save either time or expense.

Types of Joint Ownership. In North Carolina, only property held either in "joint tenancy with right of survivorship" or in "tenancy by the entirety" will pass outside of the probate process to a surviving joint owner. Assets owned as joint tenants with right of survivorship will automatically pass to the surviving owner at the death of an owner of the account. In North Carolina, tenancy by the entirety works much the same way, except that it applies only to real estate owned by a husband and wife.

If your father establishes you as the joint owner of his account, he should do so very carefully. Several other forms of joint ownership are available and may utilize deceptively similar language. Other forms of joint ownership, though, will not allow your father's account to pass to you without passing through probate.

Qualification. To qualify as a joint tenancy with right of survivorship, your father would effectively need to retitle his checking account. Most banks facilitate this change of ownership utilizing a signature card agreement that notes the identities and survivorship rights of the new joint owners.

The signed agreement would need to grant both you and your father unlimited access to the account at all times. Moreover, once the joint tenancy is created, the account could be subject to the claims of your creditors as well as your father's, even before your father's death.

Advantages. The most obvious advantage to your father's proposal is that the checking account would not pass through probate at his death, thus saving the time and expense inherent in that process. His will would not even need to reference the account.

Gift Tax Disadvantages. Perhaps the greatest single disadvantage to your father's proposal could be the gift tax consequences for him. If your father adds your name to the account.

And, if you were to withdraw funds from the account prior to your father's death, the withdrawal could be treated as a gift from him to you. If the account size exceeds $10,000 in any calendar year, or if you withdraw more than that amount in any year, your father may need to file a gift tax return.

Estate Tax Disadvantages. If your father adds your name to his account, the value of the account at his death will still be considered for estate tax purposes. Even assets that are not subject to probate are subject to estate taxation.

Q: Does anyone have any guidance on the manner in which a joint account is actually held? In Illinois, a Jumbo CD (approx $200,000) is held as "Party 1 OR Party 2" and the interest had been reported under SS # of Party 1. Upon the death of Party 1, is the "OR" designation technically the same as "AND" (implying joint ownership) or how is such "OR" titling to be interpreted? Does Party 2 assume legal ownership of CD upon death? Other accounts were held as Party 1 AND Party 2, but this "OR" designation is unclear to me... Any thoughts?