2009-05-22 / Columnists

Spotlight On Elderlaw

Beware Of The Dangers Of Joint Accounts
Commentary By Nancy J. Brady, RN, Esq. And Linda Faith Marshak, Esq.

Many people believe that joint accounts are a good way to avoid probate and transfer money to loved ones.

Such accounts are sometimes referred to as "the common person's estate plan." But while joint accounts can be useful in certain circumstances, especially between spouses, they can have dire consequences if not used properly. Adding a loved one to a bank account can affect Medicaid planning as well as expose your account to the loved one's creditors.

When a person applies for Medicaid long-term care coverage, the applicant's assets information is reviewed to determine whether the applicant qualifies for assistance. (For eligibility rules see prior articles or contact the attorneys.) While a joint account may have two names on it, most states assume the applicant owns the entire amount in the account regardless of who contributed money to the account.

If your name is on a joint account and you enter a nursing home, the state will assume the assets in the account belong to you unless you can prove that you did not contribute to it.

In addition, if you are a joint owner of a bank account and you or the other owner transfers assets out of the account, this can be considered an improper transfer of assets, disqualifying the individual for Medicaid purposes. This means that either one of the joint owners could be ineligible for Medicaid for a period of time, depending on the amount of money in the account.

The same thing happens if a joint owner is removed from a bank account.

For example, if your spouse enters a nursing home and you remove her name from the joint bank account, it will be considered an improper transfer of assets. (Certain rules apply, however, when the applicant has a spouse).

Another problem with joint accounts is that the account is vulnerable to each account owner's creditors.

For example, suppose you add your daughter to your bank account. If she falls behind on credit card debt and gets sued, the credit card company can use the money in the joint account to pay off your daughter's debt.

Finally, you need to be sure you can trust the joint account holder because he or she will have full access to the account. Either account owner can take money out of the account regardless of who contributed to the account.

There are better ways to complete

your estate planning and plan for disability than by merely establishing joint ownership. A power of attorney will ensure the person (or persons) of your choosing (in most cases people choose trusted family members) have access to your finances in the case of your disability.

If you are seeking to transfer assets and avoid probate, establishing a Trust may make better sense. Trusts can also be established to avoid probate and begin to protect one's assets from the costs of long term care.

To learn more, talk to an elder law attorney.

For more information about Estate and Medicaid planning, the attorneys can be reached at 718- 945-7777 or 718-738-8500.

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