Joint Owner vs. Beneficiaries

Joint Account

A joint owner account has one primary member as well as a person named as joint owner. Both the primary member and the joint owner have equal, or the same,

access to the functions of the account. Both can deposit, withdraw, or close the account. This degree of shared access by the primary member and the shared owner over the account should increase each party’s need to understand account access to funds held. For example, upon the death of the primary member, the joint owner may claim immediate ownership of the funds held in the joint account.

Typically, a person named joint owner on an account cannot be removed from the account once the joint account is established. However, there are exceptions including: upon the verified death of the joint owner as well as once a child reaches the legal age of majority. Once majority age is reached, a child can remove the parent/guardian and parental restrictions without parent/guardian permission. Moreover, financial institutions may request a joint owner account be closed before an account owner may make changes to the person(s) listed as joint owner(s) on the account.

Keep in mind the significance of updating the name of the joint owner on any account when the named joint owner dies. Updating the person named as joint owner or the name(s) of beneficiaries will ensure the account’s funds are disbursed according to expressed wishes.

Beneficiary

A POD (Payable on Death) beneficiary is a person selected to be the recipient of account funds upon the death of the account owner. Beneficiary designations on financial accounts are an important tool often overlooked in estate planning. The naming of a POD beneficiary is especially important when reducing the tax burden on an estate and/or its heirs is a key objective for an account owner.

Both the primary member and named joint owner on a joint account have the authorization to add, modify or remove any named beneficiary at their discretion. A named beneficiary has no ownership or right to the funds in the account while the account holder is living. Accounts may have multiple named beneficiaries.

Naming a POD beneficiary is an excellent tool in order to avoid probate; however, it is not without its share of risks and potential problems. Named POD beneficiaries supersede the provisions of an account owner’s will. To ensure clarity of intent in POD beneficiary wording as well as within their overall estate planning, account owners may want to review POD beneficiary wording with an attorney.

As an account owner with a named POD beneficiary, it is important to update the name of the intended POD beneficiary should the named POD beneficiary pre-decease the account owner. Consider it a good practice to review named POD beneficiaries annually.

In the event of death of a primary owner, a joint account owner or POD beneficiary may want to consider contacting the following:

• An attorney to update a current will;
• An investment advisory firm to obtain professional estate planning, investment and/or asset management assistance;
• The organization managing any pension services, 401(k) or IRA holdings for both the account owner and their spouse; and,
• Life insurance agents managing any such insurance

« The above noted advantages and disadvantages from having a joint owner account or named a POD account beneficiary should be discussed, along with all legal decisions, with an attorney to ensure the account owner’s wishes are fulfilled.

« To update or review an account or account ownership at DuTrac Community Credit Union or DuTrac Financial Group or First Community Trust, please contact DuTrac by calling (563) 582.1331 or email Members@DuTrac.org.