Beware: Joint and POD Accounts Can Ruin Your Estate Plan

While accounts or real estate titled jointly with your children or other beneficiaries or made payable on death (POD) to your children or other beneficiaries will avoid probate after you die, they may end up creating problems that cannot be easily undone.

For example, if you have three children but only one of them is listed as a joint owner on your bank account or real estate, then the child listed on the account or deed will inherit the entire account or property after you die to the exclusion of your other two children.  This means that the child who inherits the account or real estate will have absolutely no obligation to share the property with his or her siblings and, worse yet, even if the child agrees to share, then the child will be making taxable gifts to your other children.  Keep in mind that this will happen even if your will or trust states that  all of your property is to go equally to all three of your children.

Here’s another problem with joint accounts – what will happen if the child listed on your bank account or deed is married and gets divorced or gets sued?  Then it’s possible that some or even all of the property could become subject to a divorce settlement or judgment lien, thereby wiping out the bank account or tying up the real estate when you decide to sell it.

And here’s a problem with POD accounts – what if you name a grandchild as the POD beneficiary of your bank account or real estate and the grandchild is still a minor when you die?  Then a costly, court-supervised guardianship or conservatorship will need to be set up for the grandchild which will remain in place until he or she reaches 18, at which time the grandchild will receive the property outright and without any strings attached.

And finally, one last POD problem – what if you name all three of your children as POD beneficiaries of your bank account or real estate and one of your children predeceases you and you never update the POD designation or deed?  Then your two surviving children will inherit the property to the exclusion of the children of your predeceased child (your grandchildren).

These are only a few examples of how joint accounts and POD designations can ruin your ultimate estate planning goals.  The only way to insure that all of your property will pass to all of your intended beneficiaries in the way you expect it to pass is make sure the ownership of your accounts is coordinated with your will or trust.


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