Combining spousal accounts
Mark Freeland
children, heirs, divorce, wills, etc. - that is, that the spouses have
different interests and that keeping assets separate is one way to
facilitate protecting those interests. All well and good.
My question is of a different nature - financial identity. Decades ago, it
was very difficult for women to establish their own identity, and this
created problems for widows - getting credit or even conducting
transactions. (A plug here for Amalgamated Bank, which was one of the few
institutions then willing to address this head on, and they have always been
very progressive.) How much of a concern is this these days - not
necessarily prejudice against women, which I hope is long gone, but
generally being able to deal with financial institutions as an individual,
whether after divorce or death of a spouse, if assets are combined. Does
it become a problem when one spouse retires? And so on.
I know there are various laws regarding what assets/income may be looked at
for credit (though I've never really looked closely at these laws). My
question is a pragmatic one - in the real world, what are the risks/hassles
that one might expect if all accounts are combined into joint accounts?
Thanks,
Mark Freeland
nBe...@nyc.rr.com
Ron Peterson
> I know there are various laws regarding what assets/income may be looked at
> for credit (though I've never really looked closely at these laws). �My
> question is a pragmatic one - in the real world, what are the risks/hassles
> that one might expect if all accounts are combined into joint accounts?
If one of the joint account holders is untrustworthy, it can be a
complete hassle with accounts being drained.
IRA and Roth accounts are for individuals, AFIK. My spouse and I have
the taxable investment account and two checking accounts jointly. We
split our income into the two different checking accounts using one
for daily expenses and the other for utility bills.
If one spouse becomes unable to write checks, the other can still
access the account without having to go through red tape.
--
Ron
Don
> If one spouse becomes unable to write checks, the other can still
> access the account without having to go through red tape.
Another advantage is that, upon the death of one spouse, the account
immediately becomes the sole property of the other without having to go
through probate and be distributed according to a will. This could be a
plus in the unfortunate situation the spouses have neglected to make a
will, or if there are disputes among heirs as to provisions of a will.
Chip
needed in our particular case, but probate (time and costs) still
bothers me a bit. My wife and I like to travel a lot together and a
major crash that takes both of us simultaneously and unexpectedly is not
out of the question. How is that handled? We have made our eldest
executor of the estate divided equally among the 3 kids and secondary
beneficiary on all our accounts. Good enough?
Chip
Avrum Lapin
Big Snip
> We have made our eldest
> executor of the estate divided equally among the 3 kids and secondary
> beneficiary on all our accounts. Good enough?
>
If the estate is just money that will work but if there are going to be
disputes about who gets the "other stuff" then hopefully the two
youngest will still be talking to the eldest after distribution of
assets .
Dave
> We have made a will, and our financial adviser says that a trust is not
> needed in our particular case, but probate (time and costs) still
One of the big advantages of a revocable living trust has nothing to
do with probate. It is the ease with which your property can be
controlled in case you become incapacitated. My mother has a trust,
and was trustee, managing her own affairs quite well until she started
suffering from dementia. At that point, it was necessary for her to
move into a dementia/Alzheimers facility, and it was clear that she
was unable to manage her affairs. If she had not had a trust, it would
have been very difficult to sell her house and car, or manage her
investments. We would have had to take her to court and had her
declared incompetent, something that would have been emotionally very
hard on us. With the trust, all that had to happen was for her to
resign as trustee. The bank trust department she had named as
successor trustee took over managing her affairs, and her house and
car were easily sold. Some say that a power of attorney would have
been enough, but I understand that financial institutions and other
entities may refuse to accept a power of attorney.
Dave
Don
> We have made a will, and our financial adviser says that a trust is not
> needed in our particular case, but probate (time and costs) still
> bothers me a bit. My wife and I like to travel a lot together and a
> major crash that takes both of us simultaneously and unexpectedly is
> not out of the question. How is that handled? We have made our eldest
> executor of the estate divided equally among the 3 kids and secondary
> beneficiary on all our accounts. Good enough?
That sounds good. One thing that is sometimes overlooked is that the
executor is entitled to a reasonable fee for his or her services. You
might want to discuss that point with the 3 kids in advance and settle
on a fee, so that there will be no disputes or ill feelings later.
Depending on the size of the estate and its complexity, an executor's
fee of 5K or 10K is not unusual. For a sizeable estate, it could be a
lot more if done by a bank or a lawyer. So having it done by a family
member is a good idea, provided everybody agrees in advance.
Mark Freeland
news:e1915d10-9e7e-4b86...@d23g2000vbm.googlegroups.com...
> On Sep 18, 7:08 am, "Mark Freeland" <nBeO...@nyc.rr.com> wrote:
>
>> I know there are various laws regarding what assets/income may be looked
>> at
>> for credit (though I've never really looked closely at these laws). My
>> question is a pragmatic one - in the real world, what are the
>> risks/hassles
>> that one might expect if all accounts are combined into joint accounts?
>
> If one of the joint account holders is untrustworthy, it can be a
> complete hassle with accounts being drained.
A valid point. Your own counter point below is that it facilitates access
(in case of disability, not death) if the joint account holder are
trustworthy.
> IRA and Roth accounts are for individuals, AFIK.
Yes, as are HSAs. A good point - that each individual still retains some
separate assets.
> My spouse and I have the taxable investment account and two
> checking accounts jointly.
Trusting fools :-)
> If one spouse becomes unable to write checks, the other can still
> access the account without having to go through red tape.
Another poster (Don) mentioned avoiding probate. This can be achieved with
separate accounts and POD/TOD designations. Curiously enough, community
property is still generally subject to probate - it's basically treated as
"shared" property during life, but at death, the spouses can each will their
half away (i.e. no right of survivorship). So even if one combines into a
single account, one can still face the probate issue. In the last decade,
another form of joint ownership, community property with right of
survivorship, has been created to address this issue. See, e.g.
http://www.ggu.edu/school_of_taxation/tax_news/attachment/Jim+Henderson+Article.pdf
Thanks (and to Don) for the thought provoking comments.
Mark Freeland
nBe...@nyc.rr.com
Gene E. Utterback, EA, RFC, ABA
news:had64k$dah$1...@aioe.org...
> Don wrote:
>> On 2009-10-03 08:52:58 -0700, Ron Peterson <r...@shell.core.com> said:
>>
>>> If one spouse becomes unable to write checks, the other can still
>>> access the account without having to go through red tape.
snippage
> We have made a will, and our financial adviser says that a trust is not
> needed in our particular case, but probate (time and costs) still bothers
> me a bit. My wife and I like to travel a lot together and a major crash
> that takes both of us simultaneously and unexpectedly is not out of the
> question. How is that handled? We have made our eldest executor of the
> estate divided equally among the 3 kids and secondary beneficiary on all
> our accounts. Good enough?
>
> Chip
>
Give me a minute to climb up on my soap box -
Probate is nothing to fear AND in the vast majority of cases the cost to
probate an estate may well be CHEAPER the costs of avoiding probate.
The most commonly sold method to avoid probate is the revocable living
trust. This will work BUT it requires at least two things:
First - a trust document. This won't be cheap if its done properly. Living
Trust Documents that you can rely on will cost at least a couple of thousand
dollars and can easily be more than that.
Second - funding the trust. The document is useless until the trust is
funded. To fund the trust you have to change the title to all the assets
that you want in the trust. AND if you miss one - for example, say you
forget to change the title on your car OR you open a new bank account and
put it in your name instead of the trust - guess what? You get to do the
probate thing ANYWAY.
Trusts are a great way to deal with out of state issues - for example, if
you live in Maryland but own property in California a trust will be
considerably easier to administer than probating the estate. But for this,
there are other, easier and cheaper ways to avoid probate.
For example:
A - never put your kids on your checking account as JOINT. Instead, list
them as Pay On Death Beneficiaries AND list then as Courtesy Signators. A
courtesy signator can sign your checks to pay your bills, but it is not
their money till you die. This protects your money from their
transgressions;
B - list your beneficiaries as POD or TOD (transfer on death) on your
investment accounts. When you die they pass outside of probate;
C - there is even a way to transfer your real property to the beneficiaries
NOW while you retain completely control.
Many here will say that a living trust allows for someone to handle your
affairs in case you become incapacitated - so does a Power of Attorney, and
it costs a LOT less.
Good luck,
Gene E. Utterback, EA, RFC, ABA