06/14/2007

Important Deposit Account Rules

When you open a deposit account, you have a contract with the bank. This contract tells the bank how you want your monetary transactions handled. Once you select the deposit account you prefer, pay attention to the ownership of the account and what happens to it should you become incapacitated or die. Let’s discuss some key issues in the opening of consumer, non-business deposit accounts.

Account ownership can be individual or joint. Individual accounts are owned by one party. Joint accounts are owned by two or more parties. You can specify more signatures on accounts than there are owners, but when you do this, you typically give the non-owners unlimited access to your money. Most people do this so a relative or friend can pay bills, etc. for them in case they get sick. You must be able to trust extra signatures on any account that you own.

Rights at death provisions are important to deposit account ownership. For individual accounts, when the single owner dies, account ownership passes to his/her estate. For joint accounts with survivorship, the death of one owner causes the account to be owned by the surviving owners of the account. For joint accounts with no survivorship, the death of one owner does not cause the remaining account balance to belong to the surviving owners, but the deceased party’s ownership at death will pass to his/her estate. When you open a joint account with no survivorship, you have to tell the bank what percentage of the funds belongs to each joint owner on any given day.

Deposit accounts may also be set up as revocable trusts or pay-on-death accounts. For individual accounts with pay-on-death provisions, the funds pass to the named beneficiary, not the owner’s estate, when the account owner dies. For joint accounts with survivorship and pay-on-death provisions, the funds pass to each joint account owner upon the death of another owner until there are no surviving owners; then the funds will pass to the beneficiary named in the pay-on-death provision without any of the funds going to the estates of any of the joint owners. The revocable trust account works like the pay-on-death account, but defines the account owner as trustee and clarifies his/her rights to spend the funds and change beneficiaries during his/her lifetime.

Always ask the tough questions and get your deposit accounts opened correctly.

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06/14/2007

Important Deposit Account Rules

When you open a deposit account, you have a contract with the bank. This contract tells the bank how you want your monetary transactions handled. Once you select the deposit account you prefer, pay attention to the ownership of the account and what happens to it should you become incapacitated or die. Let’s discuss some key issues in the opening of consumer, non-business deposit accounts.

Account ownership can be individual or joint. Individual accounts are owned by one party. Joint accounts are owned by two or more parties. You can specify more signatures on accounts than there are owners, but when you do this, you typically give the non-owners unlimited access to your money. Most people do this so a relative or friend can pay bills, etc. for them in case they get sick. You must be able to trust extra signatures on any account that you own.

Rights at death provisions are important to deposit account ownership. For individual accounts, when the single owner dies, account ownership passes to his/her estate. For joint accounts with survivorship, the death of one owner causes the account to be owned by the surviving owners of the account. For joint accounts with no survivorship, the death of one owner does not cause the remaining account balance to belong to the surviving owners, but the deceased party’s ownership at death will pass to his/her estate. When you open a joint account with no survivorship, you have to tell the bank what percentage of the funds belongs to each joint owner on any given day.

Deposit accounts may also be set up as revocable trusts or pay-on-death accounts. For individual accounts with pay-on-death provisions, the funds pass to the named beneficiary, not the owner’s estate, when the account owner dies. For joint accounts with survivorship and pay-on-death provisions, the funds pass to each joint account owner upon the death of another owner until there are no surviving owners; then the funds will pass to the beneficiary named in the pay-on-death provision without any of the funds going to the estates of any of the joint owners. The revocable trust account works like the pay-on-death account, but defines the account owner as trustee and clarifies his/her rights to spend the funds and change beneficiaries during his/her lifetime.

Always ask the tough questions and get your deposit accounts opened correctly.

Back to President's Articles