Case Study 6 - The dangers of making someone a co-owner of a bank account as joint tenants with right of survivorship.
Mary is a widow with three children. In her will, Mary leaves her property equally to her three children. As Mary gets older, she is concerned that she may become ill and forget to pay her bills. She wants to give her youngest child, Jane, legal authority to write checks and make deposits in her account. She and Jane open a joint account with a right of survivorship. As Mary's health declines, she sells her house and her farm and deposits the sale proceeds in her bank account. Eventually, everything she owns is sold and the money is deposited in her bank account. To test your knowledge, take the quiz below, and select the best answer for each question.
Answers for Iowa Residents
The following answers are based upon Iowa law as of October 2004. The laws in other states may be different. Laws are subject to change, so please ask your attorney for answers to specific questions.
1. The bank account may be subject to Jane's (her youngest child’s) creditors.
- Iowa Answer: True
2. Jane could withdraw the entire amount in the bank account and deposit it in another account in her name only.
- Iowa Answer: True
3. Mary has made a gift of one-half of the account to Jane.
- Iowa Answer: It depends
4. At Mary's death, what will happen to the bank account she co-owns with Jane?
- Iowa Answer: B.
- Jane will get all of it.
5. Instead of opening a joint account with right of survivorship with Jane, Mary had the following options:
- Iowa Answer: D. All of the above (A, B, and C)
- A. She could have opened a personal agency account naming Jane as her agent.
- B. She could have executed a durable power of attorney naming Jane as her agent.
- C. She could have signed a card at the bank giving Jane authority to make deposits and withdrawals from her account.
Return to Prepare Your Estate Plan Case Study 6.
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Credits
Adapted for use in the Legally Secure Your Financial Future: Organize, Communicate, Prepare program.
Content Development by:
Anne E. Hensley
Advised by: John R. Baker, J.D.,
Staff Attorney, Iowa Concern Hotline,
Administrator of Beginning Farmer Center, Iowa State University Extension.
This information is provided as a public service and is designed to acquaint you with certain legal issues and concerns. It is not intended to be a substitute for legal advice, nor does it tell you everything you may need to know about this subject. Future changes in the law cannot be predicted, and statements in these materials are based solely on the laws in force on the date of release noted on this page.
This document is for non-profit educational purposes only. This document may not be used by a profit-making company or organization. When used by a non-profit organization, appropriate credit must be given to the Cooperative Extension Legally Secure Your Financial Future: Organize, Communicate, Prepare education program. Materials for this program were developed by a team from six land-grant universities. The program is included in the program toolkit of the Cooperative Extension Financial Security in Later Life national initiative. For more information go to: http://www.csrees.usda.gov/fsll.