Valerie K. deMartino
444 West Ocean Blvd., Suite 400, Long Beach, CA  90802
ph: (562) 628-0287     fax: (562) 394-9504    
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"RISK OF JOINT ACCOUNTS"
by Valerie K. deMartino

Many people believe that joint accounts are a good way to avoid probate and transfer money to loved ones. In fact, such accounts are sometimes referred to as "the common person's estate plan." But while joint accounts can be useful in certain circumstances, they can have dire, unintended consequences if not used properly. Adding a loved one to a bank account can affect Medicaid planning as well as expose your account to the loved one's creditors.
When a person applies for Medicaid long-term care coverage, the state looks at the applicant's assets to see if the applicant qualifies for assistance. While a joint account may have two names on it, most states assume the Medicaid applicant owns the entire amount in the account regardless of who contributed money to the account. If your name is on a joint account and you enter a nursing home, the state will assume the assets in the account belong to you unless you can prove that you did not contribute to it.
In addition, if you are a joint owner of a bank account and you or the other owner transfers assets out of the account, this can be considered an improper transfer of assets for Medicaid purposes. This means that either one of you could be ineligible for Medicaid for a period of time, depending on the amount of money in the account. The same thing happens if a joint owner is removed from a bank account. For example, if your spouse enters a nursing home and you remove her name from the joint bank account, it will be considered an improper transfer of assets.
Another problem with joint accounts is that the account is vulnerable to all the account owner's creditors. For example, suppose you add your daughter to your bank account. If she falls behind on credit card debt and gets sued, the credit card company can take the money in the joint account to pay off their judgment against your daughter.
Finally, you need to be sure you can trust the joint account holder because he or she will have full access to the account. Either account owner can legally take money out of the account (up to all of the account) regardless of who contributed to the account.
There are better ways to conduct estate planning and plan for disability. A power of attorney will ensure family members have access to your finances in the case of your disability. If you are seeking to transfer assets and avoid probate, a trust may make better sense. I would be happy to discuss these alternatives with you.

LEGAL NOTICE: This site is designed to acquaint you with Valerie deMartino and the services she can offer. It is NOT intended to provide legal advise or create an attorney client relationship. The information on this site is intended for education and discussion only. You should consult a professional about your particular facts, circumstances and goals. Ms. deMartino is licensed to practice law only in the State of California and cannot advise you on the laws of other states. This website is not intended to be advertising and is not intended to solicit anyone desiring representation based upon viewing this website in a state or other jurisdiction where it does not comply with local laws and ethical rules.