The Pros and Cons of Co-Owned Accounts

Estate Planning in Towson, MD

This article specifically addresses the Pros and Cons of accounts that are titled ‘Joint Tenant with Rights of Survivorship’, (JTWROS).

Our article on ownership of assets provides further detail on other forms of asset titling.

An account, titled in two or more persons’ names that have rights of survivorship, is jointly owned by those individuals. Each owner has the right to conduct all business on the account including making deposits and withdrawals, or even closing the account. Therefore, the importance of trusting the individual(s) you name as a joint account owner cannot be overstated.

Single seniors often add a family member as a JTWROS to their accounts in order to make their lives easier. The addition of another owner allows that person to help the senior with financial tasks such as account reconciling. However, it is important to understand the potential benefits and consequences of doing so.


PROS

An account titled JTWROS can be used as a method of estate planning to avoid probate when one owner dies. At the death of one owner, the money in the account is then owned by the surviving owner(s) and does not become a part of the deceased’s estate.

Each owner is able to conduct all business on the account. Therefore, a co-owner can pay the bills of another owner.

This element can help ensure that bills are paid in a timely manner, utilities are not turned off, and unpaid dues do not jeopardize the credit or debt of another owner. The joint ownership may also help an owner to avoid the potential appointment of a guardian of property if they become mentally and/or physically disabled.

However, a co-owned account can also have negative implications.


CONS

Regardless of who makes deposits into the account, all persons listed on the account equally own the money therein.

As a result, each owner can unilaterally withdraw funds; write checks on the account to pay their personal debt; transfer the money held in the account to a second account; or close the account. An example of this would be if you added your son as a JTWROS on your account. Months later he is able to withdraw money to take a personal vacation. That withdrawal is legal, and neither you or the bank have any recourse against your son.

JTWROS accounts can also affect Medical Assistance eligibility.

For example, if a son adds his mother’s name to his solely owned accounts, and three years later, she becomes ill; is admitted to a nursing home for long term care; and needs to apply for Medical Assistance. The state will take the position that the son’s money is available to pay for his mother’s care, therefore making her ineligible for state-sponsored assistance. With deposit tickets, receipts, and check copies, the son will then have to prove his contributions had previously been his exclusively

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