Clients frequently ask me questions about adding children or other individuals as joint owners on their bank or investment accounts. They initially consider adding a joint owner because they think it will make it easier for the individual to help them handle their finances. This is likely true. However, they often overlook the potential pitfalls to adding another person to their account or accounts. Consider the following issues:
1. The joint owner might take assets from your account and use them for their own benefit. This could be considered a legal the individual is considered an “owner” on the account. The case below suggests that there might be a opportunity to prove that, despite being added to the account, a joint holder might not be considered an owner for withdraw purposes. I am not sure I agree with the finding in the Maryland Court, but it is an interesting case. I also know that I would not want to depend on that case here in Pennsylvania. I’d prefer to be safe than sorry.
2. The joint owner will be the presumed beneficiary of the account. You might want to share the account at death with other beneficiaries and the joint owner might have other ideas.
3. The new joint owner’s creditors and/or divorcing spouse might have increase ability to go after the funds in the account you added him/her too as joint owner. This is a huge concern and would give me considerable pause considering it would not require a malicious act on behalf of the joint owner. They just have to find themselves in financial difficulties and your account would be at risk.
4. Others might have to pay the inheritance tax. There will be Pennsylvania Inheritance Tax on at least a percentage of the joint account. If your last will states that your estate shall pay the estate related taxes, the tax will come out of the estate and not from the surviving joint account owner. As a result, other estate beneficiaries might be on the hook for paying the tax even though they do not receive a single cent from it.
5. Why not just name someone as a Power of Attorney, either generally for your affairs or for the specific account. The POA will have access to the account, but will clearly have no ownership interest. Further, the POA will have a defined fiduciary duty to handle your affairs separate from their own personal gain.
Long story short, think long and hard before you add a joint owner to your accounts. Consider the potential ramifications and alternatives first, maybe even consult experienced legal counsel!
Below is the Maryland Case referenced above. Again, I am not in complete agreement with the outcome, nor do I believe that you should rely on the same result in Pennsylvania. Further, you would still have to fight it ouot in court and prove that your facts are the same as those portrayed in this case. That being said, I do find it interesting and food for thought.
A Maryland appeals court holds that the co-owner of a joint account can be guilty of theft for stealing from that account. Wagner v. State of Maryland (Md. Ct. of Special App., No. 2299, Oct. 30, 2014).
Marion Wagner asked his daughter, Jacqueline Wagner, to assist him with his finances. To aid with this, Mr. Wagner added Ms. Wagner to his bank account as a joint owner. Later, Ms. Wagner withdrew money from the account for her own use.
Ms. Wagner was charged with theft. At trial, Ms. Wagner argued that she could not be charged with theft for withdrawing money from a joint account because both parties owned the account equally. Mr. Wagner testified that he added Ms. Wagner to the account only so that she could get money out for him. The court found Ms. Wagner guilty, and she appealed.
The Maryland Court of Special Appeals affirms, holding that Ms. Wagner could be guilty of theft for stealing from a joint account. According to the court, “titling an account as ‘joint owners’ presumptively creates an ownership interest in both parties, but that presumption can be rebutted by evidence of a contrary intent of the original owner of the account.”
For a short analysis of the decision by Katherine C. Pearson of Penn State Dickinson School of Law, click here.
For the full text of this decision, go to: http://www.mdcourts.gov/opinions/cosa/2014/2299s13.pdf
For assistance dealing with developing a comprehensive nursing home asset protection plan in Pennsylvania, please contact Douglas L. Kaune, esquire at 610 933 8069 or email him at dkaune@utbf.com. Doug’s entire practice is focused on elder law, Medicaid Application, estate planning, trust planning, estate administration and protection of clients’ assets from nursing home spending and estate and inheritance taxation. Unruh, Turner, Burke & Frees, P.C. is a full service law firm which has three convenient office locations in Phoenixville, West Chester and Paoli, Pennsylvania. The firm primarily services clients in Chester, Montgomery, Delaware, Philadelphia, Bucks and Berks Counties, but can represent clients throughout Pennsylvania.