Banks let two or more people open accounts as joint tenants with rights of survivorship. Everyone named on such an account has access to the stash. When joint tenants die, surviving account holders are entitled to the account balances. Generally, if you are not named on a JTWROS account, even if you are a deceased tenant's relative, you have no rights to it. Check your state's laws for exact rules.
When a joint bank account tenant dies, her surviving account holder presents a death certificate to the bank, and the deceased tenant's name is scratched from the account. JTWROS accounts don't require fancy wills or trusts to work. Long lines, court costs, attorneys fees, and probate hassles aren't part of the picture. These accounts generally pass to surviving owners by law. Many people use them specifically to skip the potential headaches of probate court.
Generally, you transfer an ownership interest in your bank account when you add a joint tenant to it. Everyone named as a joint tenant has dibs on the account's cash. It doesn't matter if they deposit equal, different, or no amounts to account. Also, the tenants generally don't need permission from each other to make withdrawals. And banks would not allow one owner to remove another account holder's name without his permission.
Judgment creditors can freeze bank accounts and snag assets with court-ordered garnishments. Likewise, the money held in a joint account can be up for grabs by any of the named account holders' creditors. Joint tenant accounts may also get caught up in divorce proceedings if one of the tenants calls it quits with her spouse. People should carefully consider the risk of being stuck with their co-tenants' debts before jumping into a this type of account.
If you add someone as a joint tenant to your bank account but she makes no deposits to the account, you may get clipped with gift taxes. There are exceptions. For example, gifts to your spouse, gifts for medical and tuition costs, charitable and political gifts, and yearly gifts to people of up to $13,000 generally receive a pass. A tax expert can give you the skinny on joint bank accounts and gift tax implications.
- NC State University: Managing Finances After a Death
- Financial Web: Joint Bank Account Facts to Consider Before Opening One
- Maine.gov: Aging: Taking Care of Business
- Ohio State Bar Association: How Much Do You Know About Joint Bank Accounts?
- Internal Revenue Service: Gift Tax
- Internal Revenue Service: Frequently Asked Questions About Gift Taxes
- Bankrate.com: When You Die is Your Bank Account in Limbo?
- National Academy of Elder Law Attorneys: Joint Tenancy
Maggie Lourdes is a full-time attorney in southeast Michigan. She teaches law at Cleary University in Ann Arbor and online for National University in San Diego. Her writing has been featured in "Realtor Magazine," the N.Y. State Bar's "Health Law Journal," "Oakland County Legal News," "Michigan Probate & Estate Planning Journal," "Eye Spy Magazine" and "Surplus Today" magazine.