Planning with Multiple Person Accounts

There are many reasons why you might desire to involve someone else with your bank account. You may want to share ownership of the funds in the account. You may want another person to receive the funds in the account upon your death. You may simply want another person to have the ability to facilitate transactions without any ownership or survivorship rights. You may have more than one of these objectives. In order to create more predictability in light of each of these objectives, the Uniform Law Commission produced the Uniform Multiple Person Accounts Act, which has been adopted in many states.

There are three types of multiple-person accounts under the uniform law: joint accounts, pay-on-death accounts, and trust accounts. It is critical to understand the rights you are granting to another person by involving such person with each of these kinds of accounts. A trust account allows a person to serve in a trustee or agency role with respect to the funds without ever obtaining a beneficial interest. Funds remaining in a pay-on-death account on the death of the owner become the property of the pay-on-death beneficiary.

The key feature of a joint account is that while the funds "belong" to the contributor of the funds, any party to the account may unilaterally withdraw the funds in their entirety. The contributor may attempt to recoup funds that they contributed and which another party has wrongfully withdrawn, but this is a difficult and expensive process. Most people assume that the surviving owner of a joint account will necessarily own the remaining amounts in the account upon the death of the other owner, but technically, a joint account may or may not have these survivorship rights.

If your intent with respect to your account is both (1) that another person receive the remaining balance of the account upon your death and (2) that they also "own" the account during your life, then a joint account with right of survivorship makes sense. However, if you have objective (2) but not objective (1), you should ensure that the joint account has a pay-on-death option in lieu of a right of survivorship. On the other hand, if you have objective (1) but not objective (2), you should definitely not have a joint account, but rather a pay-on-death account.

If you have neither objective (1) nor objective (2), but rather simply desire that someone have the ability to facilitate transactions on the account, that person should simply be made trustee of a trust account of which you are the beneficiary. Better yet, a proper estate plan can also facilitate each of these objectives and provide many additional benefits as well.