confetti falling on married senior couple

Do Joint Bank Accounts Go Through Probate?

In most cases, joint bank accounts are not subject to the long, expensive probate process. When one member of a joint bank account dies, ownership automatically passes to the surviving member(s). 

However, there are some situations where joint bank accounts may have to go through probate. Let’s take a closer look.

When Do Joint Bank Accounts Go Through Probate?

When two or more people who are not married to each other have a joint bank account as “tenants in common,” the deceased member’s share of the account would be subject to probate. 

After probate, their share would pass to their beneficiaries instead of the co-owner. But if the joint account is set up with the “right of survivorship” instead, it can avoid the probate process. In this case, the decedent’s share will automatically pass to the surviving account holder. 

Four Issues with Joint Bank Accounts

Just because joint bank accounts typically avoid probate, it doesn’t mean they’re always a good addition to your estate. Joint bank accounts can cause several other estate planning issues, such as higher taxes. 

1: No Control Over Withdraws

Each member of a joint account has equal access. One member can withdraw all of the funds without consent from the other account holder. This can create financial issues not only during your lifetime, but it could also deprive your beneficiaries of their rightful inheritance after you’re gone. 

2: Accidentally Disinheriting Beneficiaries

Keeping your assets in a joint bank account can also inadvertently disinherit your other beneficiaries. For example, if you have three children and add one of their names to your bank account as a joint owner, only that child would inherit the account when you die. 

3: Vulnerability to Lawsuits

Another issue with joint bank accounts is that your funds become vulnerable to the other member’s lawsuits. For instance, if the co-owner of your bank account gets into a car accident and is sued for personal injury, your funds could be collected as damages. Again, you could be left without funds for your beneficiaries.  

However, with bank accounts that are set up as “tenants in common” the funds are considered separate property. This will protect your share of the account from lawsuits, however, the account will be subject to probate if the co-owner dies. 

It’s a good idea to get liability insurance for a joint bank account held with the right of survivorship. Liability insurance provides coverage for any damages or injuries that you may be held responsible for.

4: Eligible for Estate Taxes

As long as the joint owner is not your spouse, the fair market value of the entire joint bank account will be included in the value of your estate. When the joint owner is your spouse, then only half the fair market value is included in the value of your estate. Combining funds with someone can significantly increase the value of your estate and make it eligible for federal estate taxes

Safer Alternatives to Joint Bank Accounts

1. A Living Trust

A trust is a legal arrangement where a trustee manages assets for the benefit of beneficiaries. With a living trust, you still have access to the account during your lifetime. Placing your bank account in a trust allows you to transfer the account to beneficiaries after your death without the need for probate. 

2. Power of Attorney

Another option is to name someone as your power of attorney (POA). Your power of attorney is legally authorized to make financial or medical decisions on your behalf if you become incapacitated. This ensures someone you trust can access your bank accounts if you become disabled, instead of leaving the responsibility up to the other member of a joint account. 

Arizona Estate Planning Attorneys

You can avoid the risks of joint bank accounts with a little help from an experienced estate planning attorney. The Phelps LaClair team can help you create an estate plan that successfully protects your assets. We’ll help you navigate the complexities of joint bank accounts and other estate planning matters. Give us a call at 480-892-2488 today to schedule a free consultation.  


Images used under creative commons license – commercial use (4/11/2023). Photo by Chino Rocha on Unsplash

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