Do You Need Power of Attorney If You Have a Joint Account?

Power of Attorney legal document with a judges gavel, red ribbon and fountain pen.

When many Connecticut residents get older, they start to consider ways to allow their children or loved ones to assist them with everyday tasks, like paying bills and banking. Two of those ways are powers of attorney and joint accounts. Whether one or both of these “homegrown” estate planning options are right for you depends on your situation, your health, and what you want to happen to your money in your lifetime, and after you pass away.

What is a Power of Attorney?

A power of attorney (sometimes abbreviated POA) is an estate planning document that allows you to designate one or more people to make legal and financial decisions in your place. Sometimes, you will want to sign a POA to allow someone (your “agent”) to manage your financial affairs while you are on a vacation, or recovering from a medical procedure. You may also want to include a POA in your plans for your end-of-life care.

A durable power of attorney is a key part of most estate plans. This document continues to grant your agents the authority to act on your behalf even after you are no longer able to make decisions yourself. It can allow your loved ones to make decisions for you after you become physically or mentally incapacitated without having to seek a conservatorship from the Connecticut probate court.

Medical decisions are not within the scope of a power of attorney, however. For that, you can create an Advance Directive (or Appointment of Health Care Administrator), which gives your agent authority to make medical decisions for you. An advance directive can give your agent authority to continue or terminate life sustaining treatment (based on your wishes) and decide what happens to your body after your death. However, your health care agent cannot access your financial accounts to pay for the care they authorize.

Do You Need a Power of Attorney for Joint Accounts?

Banks often suggest that aging account holders add the names of their children or regular caretakers to their bank accounts so they can access funds on the account holder’s behalf. In many ways, this has the same effect as creating a durable power of attorney for just that account. A joint account holder does not need a power of attorney to get information from your bank, access the funds in the account, or make deposits or withdrawals on your behalf.

However, joint accounts give your loved one far more control over your money than a power of attorney does. Creating a joint account or adding a loved one’s name to an account you already own essentially makes them a joint owner. Each person on the account has the legal authority to use the entire account balance for any reason. In contrast, a person holding a power of attorney also has access to the grantor’s bank account, but he or she is legally required to use those funds for the benefit of the grantor. A person holding a power of attorney is a “fiduciary” of the grantor. That means they must always act in the grantor’s best interest. This gives you much more assurance that your money will be used for your benefit, even after you are no longer the one driving to the bank.

Joint account holders being treated as owners can also hurt you if your co-owner has debts, including alimony or child support. Your joint owner’s creditors have the ability to garnish the contents of a joint bank account, even if 100% of the assets in the account were deposited by you and used for your benefit. If you choose to use a joint account instead of a power of attorney, you should have a frank conversation with your child or loved one first, to make sure no one is trying to collect from them.

How are Joint Accounts Used in an Estate Plan?

If a power of attorney gives your agent the authority to control your accounts, why might you still consider a joint account? Even a durable power of attorney expires when you do. If you were to die today and your agent took your power of attorney to the bank tomorrow to withdraw your assets, the bank could turn them away empty-handed. If instead you created a joint account with survivorship rights, that ownership and control of the account would pass to your co-owner automatically upon your death.

This automatic transfer means that joint accounts aren’t part of the Connecticut probate process. Your loved ones won’t need to include it in your estate administration. That means the funds will be available to your family immediately after your death, and can be used to support the family while they grieve and go through the estate administration process.

Both powers of attorney and joint accounts can play important roles in your end-of-life care and estate planning. But those roles are not the same. The estate planning attorney at Lawrence & Jurkiewicz, LLC represents clients in Hartford and Litchfield Counties. If you have questions about the interaction between a power of attorney and a joint account, or if you are ready to start planning for your future, Attorney Edward Jurkiewicz can help. He will explain the differences between the two estate planning strategies, and help you make the best strategic choices to protect you and your family. Please call us at (860) 264-1551 or contact us at your convenience to start planning for your family’s future today.

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Categories: Estate Planning