Can I Use a Joint Bank Account to Give Money to a Beneficiary and Avoid Probate?

Bank account owned jointly “with rights of survivorship” are not subject to the probate process when one of the owners dies.

Upon the death of one owner, the other account owner simply continues to own and have complete access to the money in the account.

But there are several drawbacks to setting up and using this type of bank account:

– any of the named account owners can access all of the money in the account, regardless of whether he or she had deposited any funds into the account;

– if one of the owners of the account has a judgment entered against him or her, ALL of the funds in the account may be subject to garnishment.

An alternative to having a joint account with the right of survivorship is to have a “transfer on death” (TOD) or “payable on death” (POD) account with the bank. Most states have laws allowing such bank accounts to be created, and the beneficiary is designated by the account owner when the account is created.

A POD account has many of the same attributes as a joint bank account, except for the fact that the account owner retains sole ownership of the account while alive, then funds transfer to the beneficiary upon death without the need to probate the account.

In such accounts, the owner of the account retains all rights and interest in the money held in the account while he or she alive, and only upon the owner’s death is the money in the account transferred to the person named on the account as beneficiary.

The beneficiary can be changed at any time and the account owner can close the account any time he or she wishes.

Since the money in the account is not a asset solely of the decedent upon death, no other probate beneficiaries have any claim to it.