In my practice, I regularly work with families who added a child's name to a bank account, expecting it to take care of their estate planning needs. A joint account is a useful tool for managing day-to-day banking, but it is not a substitute for a will, a power of attorney, or a trust, and understanding the difference can save your family real difficulty later on.
How Joint Accounts Work Under New York Law
Under New York Banking Law Section 675, a bank account opened in the names of two people, payable to either or to the survivor, is presumed to be a joint tenancy. This presumption has three parts: while both account holders are alive, each is presumed to own an undivided half interest in the funds; the depositor is presumed to have made an irrevocable gift of that half interest to the other person; and when one account holder dies, the entire remaining balance is presumed to belong to the survivor. Because this is a presumption rather than an absolute rule, it can be challenged in Surrogate's Court with clear and convincing evidence that the account was never meant to work that way. That kind of challenge is possible, but it is not simple, and it puts a family in the position of litigating something that could have been addressed while the account was opened.
The Convenience Account Alternative
Not everyone who adds a second name to an account wants that person to inherit the funds. Some parents add a child solely so the child can pay bills or make deposits on their behalf, with no intention of leaving that money to one child over the others. New York law recognizes this distinction through what banks generally call a convenience account, which is addressed separately in the Banking Law. A convenience account gives the added person access to manage the funds during the owner's lifetime, without creating a right of survivorship when the owner dies. The problem is that most people are never told this option exists, and most bank signature cards do not clearly separate the two arrangements. Without that distinction on record, a court will apply the ordinary joint tenancy presumption, whether or not that reflects what the parent actually wanted.
Why a Joint Account Can Conflict With Your Will
A joint account with survivorship rights passes directly to the surviving account holder outside of probate. It does not matter what your will says about dividing your estate. If your will leaves everything equally to three children but only one child's name is on a particular account, that account belongs to that one child the moment you pass, and the other two have no legal claim to it. As we discussed in a prior article on how non-probate assets can undercut a will, this kind of mismatch between a will and an account title is one of the more common sources of estate litigation I see, and it is almost always avoidable with earlier planning.
Other Practical Risks to Consider
Beyond the inheritance issue, a joint account creates exposure while you are still alive. The person named on the account has full access to the funds and can withdraw them at any time, for any reason, without your approval. If that person is later sued, goes through a divorce, or falls behind on debts, a creditor may be able to reach funds sitting in that joint account, even if most of the money is really yours. Adding a non-spouse to an account can also trigger federal gift tax reporting once the transferred interest exceeds the annual exclusion amount, depending on how the account is used. On top of that, a joint account does nothing to address incapacity planning. If you become unable to manage your finances, the person on your bank account can pay bills from that specific account, but they have no authority over your other assets, your medical decisions, or your property, in the way a properly drafted power of attorney and health care proxy would provide.
If You Already Have a Joint Account
None of this means an existing joint account has to stay as it is. If you added a child to an account years ago for convenience and now realize it does not match your estate plan, you can generally change the account title, remove a name, or open a new account structured the way you actually intend, as long as you have capacity to do so. The bank will typically require you to complete a new signature card reflecting the change. It is worth reviewing every joint account you hold alongside your will, because the account title controls the outcome regardless of what the will says, and an inconsistency between the two is exactly the kind of gap that leads to disputes among beneficiaries later.
What I Recommend Instead
I generally advise clients to think of a joint account as a banking convenience, not an estate planning tool. If the goal is to let someone help manage day-to-day finances, a convenience account or a durable power of attorney accomplishes that without creating an unintended inheritance. If the goal is to pass money to a specific person efficiently, a payable-on-death designation or a properly funded trust can achieve that outcome with clearer documentation of your intent. And if the goal is to make sure your overall estate is divided the way you actually want, that requires a will or trust that accounts for every asset, not just the one your children happen to be named on. None of these tools are complicated to put in place, but they need to be set up deliberately, with language that reflects what you actually intend, rather than left to whatever presumption a bank signature card happens to create.
If your loved one left behind a joint bank account which needs to be sorted out from the rest of the estate, contact us today at (347) 766-2685 for a free phone consultation.
Contributed by Roman Aminov, Esq, a Queens estate attorney in New York City.
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