Mary Client, a 72 year old widow with 3 adult children, comes into my Plantation office to discuss doing a simple Will. Mary says she wants to leave her assets equally to her 3 kids upon her death. Mary’s only assets consist of a checking and savings account. I explain to Mary that she should have a durable power of attorney as part of her estate plan so that her children can help pay her bills and help with other financial matters in the event she became incapacitated. Mary says that she added her daughter June to her checking and savings accounts, so she doesn’t need a durable power of attorney. I explain to Mary that upon her death, her checking and savings account will automatically belong to June 100%, even if Mary’s Will says she leaves all her assets equally to her 3 children. The accounts will not pass through probate since they are jointly owned and therefore the Will does not control them. This is a surprise to Mary and it is not the outcome she intended. But what’s even worse, Mary then tells me that June is being sued after defaulting on a loan and she is also in the middle of a divorce. Since June is legally the owner of the bank accounts and can withdraw 100% of the balance as a joint owner, the full value of both accounts is at risk of being taken by June’s creditors and being divided as a marital asset in her divorce. Mary was shocked by this news and did not anticipate these outcomes when she added June to her accounts. I advised Mary that she should remove June as an owner of her accounts. Unfortunately, June would have to sign off on this since she is a legal owner of the accounts and June lives in Minnesota, and it would be very costly for her to travel to Florida to sign the paperwork.
What did Mary do wrong? Mary should have consulted with a lawyer prior to adding June to the accounts. Often times people do things out of convenience not realizing that there may be significant legal consequences. Had Mary met with me before doing this, I would have advised her that she could execute a durable power of attorney that would give June all the power that she needed to help Mary pay bills, and many other things, and it would not automatically transfer the accounts 100% to June upon Mary’s death. The durable power of attorney would not subject Mary’s accounts to June’s creditors nor would it cause the accounts to be treated as marital assets subject to division in a dissolution proceeding. June might be able to prove in court that the money really belongs to mom and that she was only added to the accounts for convenience purposes and that she is not “really” an owner. But who wants to be litigating that issue in court? How much money in legal fees will that cost June and/or Mary? The moral of the story is, Mary should have a trusted attorney that she can call before she makes any sort of decision like this in the future.