Avoiding probate is an important goal in estate planning. Probate court can be costly and time consuming so using methods to avoid the unnecessary hassle is appealing. Joint ownership is a way to avoid the probate court. However, it can often have unintended consequences.
Having a joint owner on a bank account for example, will allow them to write checks on your behalf and to receive full ownership of the account after your death. However, a joint owner is also able to withdraw money at any time from the account. The IRS can also pursue the jointly owned account for money owed by only one of the owners. If one of the joint owners is sued and a judgment is entered against him or her, the joint account could be at risk in an action to collect the judgment.
A durable power of attorney is more complicated than simply going to the bank and making someone a joint owner, but is much more effective as an estate planning tool. The agent in a power of attorney will be able to write checks on someone’s behalf and manage bank accounts. However, with a power of attorney, your agent cannot legally take your money or use it to pay their taxes. In this instance, a durable power of attorney is often a much preferred solution.