How to Pass Bank Accounts After Your Passing
When it comes to estate planning, one of the most frequently asked questions is: How do you pass a bank account to your children or loved ones when you pass away? While it may sound like a straightforward task, elder law attorneys Greg and Jordan McIntyre from McIntyre Elder Law explain that the answer is layered with legal and financial considerations. Simply naming someone or adding them to your account does not always guarantee a smooth transition – or the protection of your assets.
In this week’s episode of the Elder Law Report podcast, we explore the most reliable and strategic methods for passing bank and investment accounts when you pass away, while avoiding common legal pitfalls that could cost your estate dearly.
Understanding the Basics
Payable on Death or Transfer on Death Designations
One of the most direct and widely used methods for transferring a bank or investment account is by naming a beneficiary through a Payable on Death (POD) or Transfer on death (TOD) Designation. This process allows the account to bypass probate entirely and pass directly to the beneficiary you have named.
Payable on Death is typically used for bank accounts like checking and savings, while Transferable on Death applies more for investment accounts. These designations are easy to set up at your financial institution to ensure a quicker, more private transfer of funds when the account holder dies.
However, it’s important to remember that these types of accounts do not protect your money from long-term care costs, Medicaid spend-downs, or potential estate recovery. They simply facilitate a smoother transition at death, but offer no protection while you are still alive.
The Hidden Risk of Joint Accounts
Another common tactic used is to create a joint account with rights of survivorship. This means that when one account holder dies, the other automatically becomes the sole owner. While this does help avoid probate, it can open the door to unintended consequences.
Attorney Greg McIntyre explains that joint accounts, especially those involving adult children or siblings, can be subject to creditor claims during the probate process. Even though the account technically passes outside of probate, North Carolina law may still require it to be reported and pulled back into the estate if the available probate assets are not enough to pay off debts. This scenario places your funds at risk, despite your efforts to avoid such an outcome.
Furthermore, placing someone as a joint owner on your account during your lifetime means giving them full legal access to your money. That means their financial issues, such as lawsuits or divorces, could impact your funds. It also removes your ability to fully control the distribution of the account in the way you might intend.
Why Power of Attorney Offers a Safer Solution
Rather than sharing legal ownership of your account, you can name someone you trust as agent under a General Durable Power of Attorney (GDPOA). This allows them to manage the account for your benefit while you remain alive and legally in control. The key advantage here is that the agent has authority to act on your behalf without becoming a legal co-owner of the funds.
Unlike a joint owner, a GDPOA agent cannot use the account for their own benefit unless explicitly authorized. This creates a layer of protection for you and prevents your funds from being exposed to the agent’s personal liabilities. Once you pass away, the agent’s authority ends, and the funds can then be transferred through a POD or TOD designation to the beneficiary of your choosing.
Attorney Jordan McIntyre strongly recommends this method to clients because it avoids the probate entanglements that often accompany joint ownership while still allowing trusted individuals to assist in financial management.
Planning for Long-Term Care Costs is Essential
Estate planning isn’t just about what happens after death – it’s also about protecting your assets while you are still living. Statistically, about 70% of Americans over the age of 65 will require some form of long-term care during their life. This could mean in-home assistance, assisted living, or nursing home care, all of which come with significant financial costs.
Simply placing a beneficiary on your accounts does not help you qualify for government benefits like long-term care Medicaid, nor does it protect your savings from being drained to cover care costs. Assets that are still legally yours – such as those POD or joint account – are fully countable when applying for long-term care benefits. Without proper planning, you could find yourself having to spend down your life savings before qualifying for assistance.
Using Trusts for Asset Protection and Legacy Planning
For those who want more comprehensive protection, setting up a trust can offer a powerful solution. Specifically, a Medicaid Asset Protection Trust (MAPT) can shield your funds from being considered countable assets for Medicaid purposes while still allowing you some level of control and benefit.
With a trust in place, your assets are legally separated from your personal estate. This makes them inaccessible to creditors and government recovery programs. It also ensures that when you pass away, your funds can be distributed exactly as you wish, without the delays and expenses of probate.
A trust can also be tailored to fit the needs of your beneficiaries. For example, if you’re leaving money to young children or grandchildren, the trust can be structured to provide funds for specific purposes – like education or housing – over time rather than giving a lump sum that may not be managed wisely.
How McIntyre Elder Law Can Help
Passing along your bank accounts when you die involves more than just naming a beneficiary or adding a joint owner. Each option has its benefits, risks, and consequences. By understanding the differences and planning accordingly, you can avoid legal entanglements, protect your financial future, and ensure your legacy benefits your loved ones—not the probate court or creditors.
Greg and Jordan McIntyre emphasize that good planning isn’t just about what happens after you’re gone—it’s about ensuring you’re protected while you’re still here. If you’re serious about doing it right, it’s time to consult with an experienced elder law attorney.
You can claim a free consultation with the attorneys at McIntyre Elder Law by calling 1-888-999-6600 or scheduling online at mcelderlaw.com/scheduling. Take the first step today. As Greg says, Clarity is king.
Keep in Mind!
- Don’t wait until it’s too late! Start your plan now.
- Review and update documents regularly. Keep your plan consistent with your current goals.
- Educate yourself. Knowledge is power when it comes to your legacy!
Greg McIntyre
Founder, Managing Attorney, CEO
McIntyre Elder Law
Charlotte, NC
Jordan McIntyre
Estate Planning & Elder Law Attorney
McIntyre Elder Law
Shelby, NC
Frequently Asked Questions
Is it enough to name a beneficiary on my bank account?
Naming a beneficiary ensures the account bypasses probate, but it does not protect the funds from long-term care costs or Medicaid recovery.
Can my child access my bank account if they are a joint owner?
Yes, and that can be a major concern – even if you trust your child wholeheartedly. As a joint owner, they legally own the money too, and it could be exposed to their creditors or personal financial issues.
What happens if I don't name any beneficiary?
The account will become part of your probate estate, which means it must go through the court process before anyone receives it. This can delay access, deplete funds, and create additional costs.
Does a Power of Attorney replace the need for a will or trust?
No. A POA is effective only while you are alive. A will or trust is necessary to control how your assets are distributed after death.
How do I protect my assets from nursing home costs?
The best way is through advanced planning using tools like a Medicaid Asset Protection Trust. Consulting an elder law attorney is crucial for this.
Can a trust still allow me to use my money?
Yes, depending on the type of trust. With a properly structured irrevocable trust, you may still benefit from the income while protecting the principal.
