Here is another common estate planning mistake - putting your children's names on your bank accounts.
My name is Bill Miller. I am an estate planning and elder law attorney in Anniston, Alabama. One of the most frequently asked questions we get from people is: Why can't I just put my children's name on my bank accounts instead of doing a power of attorney or other estate planning documents.
There is nothing that says you cannot put your children's name on your accounts, but just like everything else, there are risks in doing so. In this case, the risks usually outweigh the rewards.
Most people put someone else's name on their account so that during their lifetime, if they become incompetent and unable to manage their own affairs, a loved one has access to the account to write checks or pay bills. Other people just put the children’s names people's names on the account as a beneficiary so that when they pass away the account goes directly to that person and does not have to go through probate.
Let me address each one of those issues separately. First of all, if you put someone else's name on your account and make them an immediate owner of the account, then they have access to the account to go in and do whatever they want with the money. More importantly, so do their creditors.
As an example of a horror story, I had a lady come in my office crying her eyes out, understandably, because on a Thursday she was going on vacation and she put her adult son and daughter on her savings account. She had about $150,000 in her savings accounts. When she got home on Sunday night, all $150,000 was gone!
Unbeknown to this lady, her son had an IRS lien from a business that he had. When the IRS found out that he was the owner of this account – or a co-owner of this account – with $150,000, they cleaned it out to satisfy their lien. That is the problem with making other people owners of your account in Alabama. That is just one of the problems.
The problem with leaving someone as a beneficiary on the account is that it doesn't give them access to your account while you are alive. The way around this is to do a power of attorney or put the account in trust. We address those at our Anniston estate planning workshops.
The main problem with just having a beneficiary is it doesn't allow someone to access it during your lifetime. If you become incapacitated or incompetent, then that person can't write checks and take care of your bills. A power of attorney as part of a comprehensive Alabama estate plan would solve these problems and reduce the risk of loss to zero.
For more information, order a free copy of our report The 7 Biggest Mistakes People Make in Their Estate Plan by clicking the link. You can also register for a free estate planning workshop by calling us at 256-251-2137 or visiting www.AnnistonEstatePlanning.com.