Joint Checking Accounts & Death

Rights of survivorship allow the surviving owner to continue writing checks.

Although it seems natural that the surviving owner of a joint account would gain complete control of the funds upon the death of the other owner, it all depends on the type of joint account you have. It's vital to understand the type of survivorship stipulations associated with your account early on to avoid complications down the road. Additionally, you may consider other types of accounts that have the benefits of a joint account but minimize the confusion.

Joint Tenants with Rights of Survivorship

When you have a joint account with rights of survivorship, both you and the person with whom you've opened the account are equal owners of the funds in the account, and upon one's death the other becomes the sole owner of those funds. Most times, the surviving account owner simply needs to show the bank the death certificate of the deceased to claim full rights to the account. According to Bankrate, with most banks, if your partner dies you may continue to withdraw from the account prior to presenting the bank with the death certificate because you are both 100% owners of the account.

Tenants in Common

If you have a joint tenants in common account, you and the co-owner of the account may specify to whom your individual portions of the money should be left in your wills. With a tenants in common account, the surviving account owner may have to wait until the will has been carried out before making any withdrawals or charges. Estate planning lawyer Martin Shenkman says that, depending on the state, the surviving owner may have to wait for tax clearance as well.

Warnings

If you are the surviving owner of a joint account and you are not the deceased's spouse, you may run into tax triggers in the event that you withdraw more than $13,000 per year from the account. Anything over that amount is considered a gift, and you may be required to pay taxes on it. Unmarried co-owners should consult with an accountant about the distribution of funds and the tax repercussions that the surviving partner may face upon becoming sole owner of the account.

Considerations

Rules of survivorship for joint accounts vary by state, so it's vital that you check with your financial institution about survivorship and tax penalties when you're setting up your account. Due to the possibility of complications in the distribution of funds upon death with joint accounts, Bankrate recommends alternatives, such as specifying direct beneficiaries of an account; durable powers of attorney for specific instances (such as sickness or incapacitation), or a trust.

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