Mistakes That Can Ruin Even a Great Estate Plan

By Peter E. Grosskopf

 We will do a series of articles looking at common problems or issues that arise in the context of Estate Planning but looking at them from different perspectives. 

In this first article, I want to address a mistake or problem that commonly occurs, when the parent or parents, add one of their children as a joint owner on their bank accounts.    

I have seen this many times over the years, where an individual or couple may have a perfectly good estate plan, wonderfully drafted, properly executed, and then they ruin it by going to the bank or banks, and adding one of their children as a joint owner on their accounts.  Often, when asked about it, I am told that the banker recommended it for one of a variety of reasons: either to avoid probate, or to assure that money is immediately available to pay bills and expenses, or because that person was named as the agent under Power of Attorney anyway. 

So what’s the problem with this?  First of all, under the law, after death, the money in that joint account becomes the property of that surviving joint owner.  It is what I call the “Mom must have liked me best” problem.  And sometimes that son or daughter will share the money with the other family members, but in my experience, most times they do not.  

Secondly, during the lifetime of the parents, even while they are alive, again under Wisconsin Statutes, that joint owner has full and unrestricted access and they can remove any or all of the money with very little recourse to try to get it back. 

I was successful in recouping money under such circumstance one time, where a son had removed a substantial amount of money from his mother’s account while his mother was alive. We were successful  largely due to the fact that the banker who had set up the joint account testified in court that the mother had explained that she only wanted the son to get this money after her death, not during her lifetime.  Even assuming that to be accurate, one questions why the banker didn’t suggest a Payable on Death Beneficiary designation, rather than the joint owner designation. But in any event, we were successful in that case in getting it back, but in most cases, you might not find a banker who handled that particular transaction, or even if you can locate him or her, they may not have any memory, notes or other records about why the joint ownership was selected. 

Third, even if that surviving joint owner does share with the rest of the family, they often won’t use it for the intended purpose of paying the bills and expenses, but rather they will have the bills and expenses paid out of the estate and simply pocket the money.

Finally, to make matters worse, the parents might do this on most if not all of their accounts, so that their finely tuned Estate Plan is turned upside down, because the joint ownership designations take precedence over the will, trust, or other Estate Planning documents.

In coming articles, we will talk about other mistakes that people make that can ruin a perfectly fine Estate Plan.