Three Reasons Why Joint Accounts May Be a Poor Estate Plan

Typed words on page, white on black, joint account with font effectsMany people, especially seniors, see joint ownership as an easy way to avoid probate and plan for incapacity, but there are major drawbacks to joint accounts.

When people own property as joint tenants, each person has an equal ownership interest in the property. If one joint tenant dies, their interest immediately ceases to exist, and the other joint tenant owns the entire property. 

Joint ownership of investment and bank accounts can be a cheap and easy way to avoid probate since joint property passes automatically to the joint owner at death. In addition, joint ownership can also be an easy way to plan for incapacity since the joint owner of accounts can pay bills and manage investments if the primary owner falls ill or suffers from dementia.

These are all true benefits of joint ownership, but there are three potential problems:

Risk of Joint Tenants

Joint owners of accounts have complete access and the ability to use the funds for their own purposes. Many children who are caring for their parents take money in payment without first making sure the amount is accepted by all the children.

In addition, the funds are available to the creditors of all joint owners, so if the child got divorced or was sued, the money could be available to the child's creditors. Similarly, if a joint owner applied for public benefits or financial aid, the money would be considered as belonging to all the joint owners.


If a senior has one or more children on certain accounts but not all the children, some may end up inheriting more than others. While the senior may expect that all of the children will share equally, and they often do in such circumstances, there's no guarantee.

People with several children can maintain accounts with each child, but they will have to constantly work to make sure the accounts have the same amount. Despite constant attention, one or more accounts may be used for unexpected life circumstances like paying for in-home or nursing home care.

The Unexpected

A system based on joint accounts can really fail if a child passes away before the parent. Then, it may be necessary to seek conservatorship to manage the funds, or they may ultimately pass to the surviving siblings with nothing or only a small portion going to the deceased child's family.

For example, a mother put her house in joint ownership with her son to avoid probate and Medicaid’s estate recovery claim. When the son died unexpectedly, the daughter-in-law was left nothing despite having devoted the prior six years to caring for her husband's mother.

Joint accounts do work well in two situations. First, when a senior has just one child and wants everything to go to them, joint accounts can be a simple way to provide for succession and asset management. It has some of the risks described above, but for many clients, the risks are outweighed by the convenience of joint accounts.

Second, it can be useful to put one or more children on your checking account to pay customary bills and to have access to funds in the event of incapacity or death. Since these working accounts usually don't consist of the bulk of a client's estate, the risks listed above are relatively minor.

For the rest of a senior's assets, wills, trusts, and durable powers of attorney are much better planning tools. They do not put the senior's assets at risk. They provide that the estate will be distributed as the senior wishes without constantly rejiggering account values or in the event of a child's incapacity or death. And they provide for asset management in the event of the senior's incapacity.

Learn about all the different ways to co-own property.

Talk to your attorney about what the best plan for you is. Find an attorney near you.

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Questions? Contact us at Chambliss, Bahner & Stophel, P.C.

Chambliss, Bahner & Stophel, P.C.
Liberty Tower | Suite 1700 | 605 Chestnut Street | Chattanooga , TN 37450
Phone: 423.756.3000