Estate Planning with Convenience Accounts

A family that needs to manage a senior member’s finances will typically use a joint bank account, but this may not be the best estate planning option.

When a person begins to decline cognitively, a joint bank account provides no safeguard to prevent the co-owner from withdrawing all the money. The co-owner may also inadvertently cause problems since the co-owner’s creditors can reach the joint account. Additionally, a joint account may create a family discord due to the right of survivorship it creates.

A better, perhaps safer, option is a convenience account; a multiple-party account without right of survivorship. These accounts require a co-owner to act as the agent of the senior owner, and they prevent the co-owner from using account funds for personal benefit. Creditors of the co-owner are also prohibited from claiming the funds.

Convenience accounts exist in states that have adopted the Uniform Multiple-Person Accounts Act, and may exist in some states that have not adopted the Act. Though a durable power of attorney is most likely the best option for managing a senior’s finances, a convenience account may be a possible fall-back solution for families needing estate planning help.

See Paula Span, A Better Bank Account, The New Old Age, Mar. 4, 2011.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this to my attention.