As we discussed previously, there are four different types of multi-party accounts that must be considered as an essential component of an estate plan. The types of accounts are: 1) joint account, 2) agency/convenience, 3) payable on death, and 4) trust.
The convenience account is created by the primary accountholder and the co-signer, but the funds are considered to be owned by the accountholder, regardless of who makes deposits into the account. The amounts deposited are not considered to be gifts to the co-signer. Either the accountholder or the co-signer may withdraw an amount up to the entire amount of funds in the account, as long as the accountholder is living.
There are no survivorship rights with a convenience account. Upon the accountholder’s death, any funds remaining in the account pass along with the accountholder’s probate estate.
If the cosigner withdraws funds from the account after the accountholder has passed away but before the bank receives written notice of the accountholder’s death, the bank is not liable for those withdrawals.
The risk convenience accounts present, of course, is that the co-signer will make unauthorized withdrawals. However, the convenience account can serve as a helpful tool to enable adult children to assist older parents who can’t write checks and need assistance in paying bills.
Nevertheless, having all assets paid into a “living trust” can provide better protection for an elderly account.