Joint accounts can prove helpful or problematic.

Estate planning can feel daunting.

If you are a private person, the public nature of probate may be particularly unappealing.

Even if you have a last will and testament, not all assets should necessarily pass through your last will and testament.

Some assets will be distributed to heirs through beneficiary designations or joint accounts.

According to a recent The Street article titled “Protecting Your Assets: Joint Accounts and Beneficiary Designations,” it is important to know what rules govern specific assets and how they align with your estate planning goals.

Owning assets together through joint accounts may leave inheritances vulnerable for some families.

Place yourself in this scenario.

You own a home, life insurance, an IRA, and a few bank and investment accounts.

You and your spouse each have a last will and testament.

These last wills are mirror-image, leaving assets to each other when one dies and then dividing the inheritance equally among your children if you both die.

You have accounted for a possible reality of being preceded in death by a child.

In this case, you want the share of such predeceased child to pass per stirpes to his or her children.

You and your spouse also have designated each other as primary beneficiaries and co-owners of joint accounts.

Your children are listed as contingent beneficiaries.

Then one of you dies.

The surviving spouse names all living children as beneficiaries and signs a quit claim deed to place the name of the children on the house title before dying.

All seems fine.

Rut row.

Unfortunately, life is not always so simple.

What happens if one of your children divorces, files for bankruptcy, or is sued?

Is the inheritance protected?

No.

It is actually quite vulnerable.

What will happen if you only list one child as a contingent beneficiary on your accounts?

This child will receive the bulk of your estates, even if the last will and testament directs equal division of assets.

Why?

Beneficiary designations and joint account designations supersede instructions in a will.

This means your "inheritance favored" child could choose to keep the bulk of the inheritance and will not be obligated to share with your other children.

What happens if one spouse dies and the other remarries?

The surviving spouse may choose to change beneficiary designations and joint accounts to the name of the new spouse.

This new spouse could change beneficiary and contingent beneficiary designations after inheriting.

This could leave your children without an inheritance.

Yikes!

In some instances, beneficiary designations and joint accounts are insufficient for certain estate planning goals and circumstances.

For example, we have successfully avoided probate on estates by these very methods just hours before a client dies in hospice.

If avoiding probate is important and time is not of the essence, then a trust may prove a better option for you and your family.

Reference: The Street (Oct. 30, 2020) “Protecting Your Assets: Joint Accounts and Beneficiary Designations”