There are different ways to handle bank accounts for estate planning purposes. If a client merely adds a Payable on Death (“POD”) designation on a bank/credit union account titled solely in the name of the client, then the beneficiary has no right to access funds or information on this account during the life of the client; however, upon the death of the client, the money will transfer automatically to the listed named beneficiary(ies) and avoids probate. Another option is to grant authority only to access funds/information, deposits and write checks during the life of the client. This authority would cease automatically at the client’s death unless a POD beneficiary is on file with the bank/credit union. Also, the client could have a Durable Financial Power of Attorney that has been properly executed with banking powers that appoints a person(s), called an attorney-in-fact, to handle their banking. Likewise, this authority and granted banking power stops at death of the client.
Joint bank accounts are another option. Indiana Code 32–17-11–1 et seq. statutes and case law with specific facts interpreting these statutes give clear guidance on joint bank accounts (also called Multiparty Accounts). If a joint bank account is set up jointly with others named, then it defaults to jointly owned with rights of survivorship—meaning if one person dies their interest in the joint account transfers automatically to the remaining owner(s) at death. This can only be rebutted by clear and convincing evidence (a high legal standard) at the time the joint account is created, or later in writing, by all the joint owners during their lifetimes. Any of those listed on the account can fully access the funds in the joint account during their lives. Also, upon the death of one of the joint owners, it goes automatically to survivors, and not pursuant to a Last Will and Testament in place for the decedent. The surviving owners of a joint bank account do not have to use these funds to pay the last or estate expenses of the decedent.
Also, for Medicaid/asset protection purposes, listing another person on a joint account, or as a beneficiary, does not change ownership of the net contribution to the joint account and is still owned as an asset/resource for Medicaid planning purposes.
The bottom line is I discuss with the clients the different legal options on how to title, or list POD on bank/credit union accounts and the consequences of how bank accounts are set up since they are an important part of the estate planning process.