In this episode of the Good Steward Law and Wealth Podcast, host Led Jennings explains how to manage bank accounts within an estate plan. He defines the scope (checking, savings, money‑market, CDs – excluding retirement and investment accounts) and emphasizes two primary goals: ensuring a trusted person can access the account if the owner becomes incapacitated, and passing the account to heirs outside probate. Jennings outlines three ways to achieve probate‑avoidance: (1) joint ownership, (2) naming a beneficiary/transfer‑on‑death (TOD) designation, and (3) holding the account in a revocable trust. He critiques the common practice of adding a child as a joint owner, warning of creditor exposure, divorce risk, and loss of control. Instead, he recommends naming children as beneficiaries while granting them durable power of attorney for incapacity situations. He also discusses the limitation of a simple beneficiary designation—once the heir inherits, they can use the funds freely—so he advises using a trust as the beneficiary to retain control over distribution (e.g., paying funeral expenses, funding grandchildren’s education). A concrete example illustrates how a savings safety‑net can be structured via a trust to meet both immediate and long‑term family goals. The episode concludes with a clear takeaway: avoid joint ownership with children, use beneficiary designations paired with power of attorney, and consider a trust to dictate post‑mortem use, reinforcing the podcast’s theme of being good stewards of wealth.
Welcome to the Good Steward Law and Wealth Podcast, where host Ledly Jennings explores law and finance to help listeners become better stewards of their wealth. Each episode covers the latest trends and strategies in estate planning, elder law, investment, and wealth management. Tune in for the knowledge and tools for financial success and security.
Welcome to the Good Steward Law and Wealth Podcast. Um, glad to be here today. Today we are going to talk about about something that everyone has. We're going to talk about bank accounts and how you pass on your bank accounts in your estate plan. What's the best way to do that? So, to start out, most people have a bank account today. Mostly when we're talking about this, we'll, we'll be talking about a checking account, but really the same thing applies to savings accounts, money market accounts, CDs, really anything at a bank. We're not talking about retirement accounts or investment accounts, but generally anything that you would consider a bank account would apply today. The main thing I look at when I start talking about bank accounts is how do we make sure, one, somebody has access to that account if you are incapacitated. So if you are in the hospital, you know, your bills still need to be paid from that account, or even if you're in the nursing home and you can't get out to manage your own affairs, someone needs to be able to access that account. So that's the first thing we look at. The second thing we look at is how do you pass it on outside of probate? So if you pass away, we don't want your bank account to be stuck in the court system. We want it to go directly to who you want it to go to. So let's start there. Let's start with how do you pass it on outside of probate? Well, there is 3 ways to do that. One, you could have a joint owner on the account. So someone else whose name's on the account who can sign checks. That way, if you pass away, it goes to that joint owner. That's a lot of times like a husband and wife. Husband and wife had a joint account. Husband passes away, it's automatically the wife's, no court involvement. The next way it passes on is with a beneficiary designation. So some banks call it transfer on death or TOD. Some call it just naming a beneficiary, but basically you have to name someone as your beneficiary on that account. And then it passes outside of probate. Uh, the third way is if that account is owned by a trust or in a trust, then it passes to the trust outside of probate. So those are the three ways you can do that, but what are the pros and cons of each, each method? Well, the first one we mentioned is a joint owner. So it's always a joke is a lot of clients come into my office and say, well, I've taken care of my bank account. I've put my kid on the account. And I don't know how this got started, but somehow it became the common thing you do is name your kid as you get older as a joint owner on your account. But I'm going to say today, do not name your kid as a joint owner on your account. It achieves certain purposes and accomplishes goals, but it's not the best method. And here at the Good Steward Law and Wealth Podcast, we all, we want to be the best steward of our assets. And naming them as a joint owner is not the best method. So why do people name them as a joint owner? Well, one, your kids would then have access to the bank account if you're incapacitated. So you're in the hospital, in the nursing home, then they can sign checks, they can do what they need to with that account. Um, so it achieves that goal. And the second is it avoids probate. You know, if they're a joint owner, just like a husband and wife, if you pass away, whoever's on that account with you, it goes directly to them. Um, so we're saying all these good things about naming your kid as a joint owner. Well, why am I saying don't do that? Well, there are a lot of downsides and it's not the best method. What are the downsides? Well, one, if they are a joint owner on that account, they can do whatever they want to with that account. It's just as much yours as it is theirs. They can write checks out of it. They can take the money and run. You know, it is their account just like it is yours. And then, you know, a lot of people say, well, I trust my kid. They wouldn't take all the money and run, right? They may not, but things out of their control could access that account. Meaning if they're a joint owner, their creditors become your creditors. So if they are sued for any reason, they have creditors, something like that, that bank account is considered their asset. So it's open to their creditors. So things outside of their control, even divorce, it could be open to their divorce. So. Why risk that account when there are other methods of naming your kids rather than joint owners? So the best method is to name your child as a beneficiary. So do not name your child as a joint owner, name them as a beneficiary on your account. So they have no access to it, or their creditors have no access to it while they're living. They just goes directly to them when you pass away. How do they access your account if you're incapacitated, if they're not a joint owner? Well, that is what the power of attorney is for. So you name your kids and give them power of attorney. They can then use that bank account the same way you would want them to. They can write checks, they can pay your medical bills, they can make sure you're provided for while you're in the hospital or the nursing home, but it's not open to their creditors. That's the benefit of a power of attorney. So a proper estate plan Names your kids as power of attorney, therefore they can use the bank account for your benefit, and then you name them as a beneficiary on the account. So that is what you need to be doing instead of making your kids joint owners, is a power of attorney and a beneficiary designation. Now, one other issue that comes up with this is a lot of clients come into my office and say, well, We have named our kid as beneficiary or even joint owner on this account, and they know what to do with it when they're gone. Meaning they want their son to inherit the account, and then he knows that he is supposed to split that account with his sibling or with his, the grandkids, whoever it is. Now, that's a bad method because as soon as your son, if your son's named as beneficiary, when he inherits that account, It's his account. He can do whatever he wants to with it. He does not have to follow these unwritten rules. It is his account. So it's not always best to rely on what you tell your son you should do. You need to put it in writing in an official and legal manner to take care of that. So one way to do that is if you want your bank account split evenly between your kids, then name them both or 3 of them, how many ever it is, as beneficiary on the account, then they have to split the account equally. But another method is name a trust as a beneficiary, and then within the trust, you can control what happens to the account in any manner possible. I'll use one example to kind of bring this point home. Let's say you have a savings account with a couple hundred thousand dollars in it. You know, it's your safety net. You've built it up. You're not accessing this account, but it's there. In case you need it in your retirement. So what do you want to have happen with that account? Well, the intention for that account and a lot of people is to make sure their funeral is paid for, their bills are paid for, you know, their heirs don't have to pay for anything out of pocket. That's what that account's used for. But then they want that, the rest of that account to go to the grandkids to help pay for their school, maybe. So what you would do with that type of an account is you make the beneficiary of that account your revocable trust. So when you pass away, whoever your trustee is inherits that account. They can immediately access it to pay for your funeral, to pay for your medical expenses. And then they follow your instructions of, let's say you wanted to provide for your grandkids' school. They can then take that account as trustee and set up 529s for your grandkids or whatever account they deem appropriate for their school. So within the trust, if you leave your bank account to a trust, they can do whatever they want to with it, meaning they have to follow your instructions of the trust. So, um, whatever you want to have happen is put into writing. It's not left out there unknown, and it's not open to creditors, to divorce, to anything of your kids. So if it's left in the trust, it's a protected manner, and what you have built up ensures it goes directly to them. So the takeaway from this call is do not name your kids as joint owner of your bank account, name them as beneficiary, and have a power of attorney in place so they can take care of you if you're incapacitated. And that is the best solution, and that's what we're all about here is doing the best solution. So this is another episode of the Good Steward Law and Wealth Podcast where we believe that everything is a gift and it's our job to do the best with what we've been given by being good stewards of our wealth. Thank you for listening.
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