Warning for seniors about accounts

Before I sold my estate-planning law practice more than 10 years ago, I often advised seniors with modest estates to have the name of a trusted child or friend put on their savings and checking accounts as a signer so that they could pay bills or shop for them should they become temporarily unable to attend to those tasks. It was no different than a business having the bookkeeper as a signer on its bank account to perform similar duties. In either of these cases, the signer did not have ownership of the funds in the account. They had a fiduciary duty to use the account for the benefit of the parent, friend or business.

Today, however, retirees — be they single or married — don’t have that option. Banks continue to allow signers on business accounts but will not allow individual customers to do the same. When an individual or married couple ask to add a child or a friend on the account as a signer, the banks say “sure” and add them on the account as a joint tenant. This new person will be authorized to sign checks, but it also grants them ownership rights to all the money in the account.

The legal implication of this can be devastating. It allows the child or friend to use the money for themselves. It allows a creditor of the child or friend to take money in the account to satisfy a judgment. The individual or couple will initially think theft. But the bank and the police would tell them that they should have known what “joint tenancy” meant when they added the person’s name to the account. Their “understanding” or what they expected may stand for naught. If a bookkeeper/signer at a business issues checks for his or her own benefit, he is arrested for embezzlement. The joint tenant walks.

I spoke to bank officers in seven banks in Northern New Mexico. While they all allow adding a signer to a corporate or business account without ownership rights, none allow a signer on individual accounts without making them a joint tenant.

This may be an industry-wide bank policy, or the default position of the software for banking back-office computers or government mandate. No one would tell me. Whatever the reason, it should be changed to give individuals and couples — retirees or not — the same rights and protection as a business has to have limited signers.

Banks continue to allow signers on business accounts but will not allow individual customers to do the same.