Probate can be a difficult process. But using joint accounts to avoid it may not always be a good idea.
If you are thinking that joint accounts are a foolproof way to escape probate and funnel dollars to loved ones as a sort of “poor man’s estate plan,” think again. Circumstances exist when a joint account is an excellent option. But the instrument has its pitfalls as well, and if misused or entered into without caution, joint accounts can pose serious risks. Adding a loved one to a bank account may seem like a prudent action, but such actions can impact Medicaid planning or even make your account “fair game” for your loved one’s creditors.
Applications for Medicaid long-term care coverage can be tricky. States are obliged to examine the applicant’s assets to determine eligibility. Although a joint account may include two or more names, states tend to make the assumption that the applicant is the owner and entirely responsible for the total funds in the account, irregardless of who might have contributed to the account. Imagine your name is on a joint account. You enter a nursing home. The state is still likely to assume that the account’s assets are yours – especially without proof otherwise. Realize also that proving anything is a lot more difficult from inside a nursing home, or even an assisted living facility, when you might not have ready access to your papers and files as you did within your home sweet home back when you were well and able.
It can get worse. What if you or the other joint owner of the account decides to take monies out of an account that is already under state scrutiny? This can be perceived as “improper transfer of assets” for Medicaid purposes, which may have an adverse effect upon your eligibility. You or the other joint owner could become ineligible for Medicaid for a period of months or perhaps years. In fact, if a joint owner is removed from an account, it can appear suspicious to investigators. Example: Your parent enters a nursing home. You decide to remove your parent’s name from the joint bank account. Again, this simple action, prudent on its face, can be construed as an improper transfer of assets.
Remember that an account remains exposed to all the account owners’ creditors. If your son is added to the account and falls behind (or worse, defaults) on his credit card debt and gets sued, guess who is on the hook? Under laws currently in effect, a credit card company can confiscate the money in your account to pay off your son’s debt. Another pertinent question revolves around trust. Can you completely trust the person you are adding?
Viable alternatives to joint accounts do exist. A consultation with your attorney specializing in Elder Law may suggest a durable power of attorney or else a well-considered trust instrument. Seek out a qualified Elder Law attorney near you.
Gene Osofsky is an East Bay elder law attorney in California. Gene Osofsky specializes in Medi-Cal planning, wills, probate, trusts, nursing home issues, special needs planning, and disability planning. To learn more about East Bay elder law lawyers, East Bay elder law attorney, Medi-Cal planning, Medi-Cal planning lawyers and The Law Offices of Osofsky & Osofsky, visit Lawyerforseniors.com.