Ask a Lawyer: Possible Perils of Joint and Multiparty Bank Accounts

written by Attorney Kirk G. Siegel

Q:  I am 83 years old and was thinking of adding the oldest of my three children as an account holder on my bank account. She lives near nearby and helps me with paying bills. Is this okay?

A:  Caution is advised in this situation as there are a number of possible problems.  A power of attorney for your daughter might be preferable.  First, the terms of a deposit account need to be read carefully because frequently each account holder will have the right to withdraw the entire account, regardless of his or her contribution.  That type of account would give your daughter more rights in your account than you might intend.  It also might make that daughter (and not your other children) the owner of the account at your death because 18-A M.R.S.A. §6-104 provides that “sums remaining on deposit at the death of a party to a joint account belong to the surviving party or parties (rather than the estate of the decedent) unless there is clear and convincing evidence of a different intention at the time the account is created.”

A “joint account” is one of three types of multiparty accounts defined by the Maine Probate Code.  A joint account is simply an account payable on request to one or more of 2 or more parties, whether or not mention is made of any right of survivorship.  18-A M.R.S.A. §6-101.  During the lifetime of the joint account holders, the account belongs to the parties in proportion to the net contribution by each to the sums on deposit unless there is clear and convincing evidence of a different intent.  18-A M.R.S.A. §6-103.  You should know that, if your daughter had financial difficulties, the claims of her creditors could tie up your account if you make her a joint account holder.

The other two types of multiparty accounts are P.O.D., e.g., “payable on death” and trust accounts.  A P.O.D. account is payable on request to one person during lifetime and on his death to one or more P.O.D. payees.  The account belongs to the original payee during his lifetime and not to the P.O.D. payee or payees.  At the original payee’s death, the account belongs to the P.O.D. payees in equal and undivided shares.  While this would allow you to have the account automatically divided amongst your surviving children at your death, it would not allow your older daughter to make transactions on the account during your lifetime.

A “Trust account” means an account in the name of one or more parties as trustee for one or more beneficiaries where the relationship is established by the terms of the account at the bank, and the trust does not have other assets. The nuances of trust accounts exceed the scope of this article.

A payable on death approach is also available in Maine for transactions involving investment securities and security accounts.  Maine has adopted the Uniform Transfer on Death Security Registration Act, which appears in 18-A M.R.S.A., Article VI, Part 3.  The law allows individuals to hold investment securities and brokerage accounts as joint owners with right of survivorship and to designate a payable on death beneficiary. The security will be payable to the designated party and will not become part of the probate estate or governed by the Will.

There are other aspects of multiparty accounts too numerous to discuss, which could be relevant to your situation and should be reviewed with legal and financial advisors.  These include estate and gift tax effects of withdrawals by a party who did not contribute to the account, accounting challenges in the event of divorce and others.  Multiparty accounts, however, may be a critical part of an estate plan as long as they are fully understood.