Dear Attorney Tully:
I am an 85-year-old widow. I am considering adding my children’s name on all of my bank accounts in an attempt to protect them if I need nursing home care in the future. What do you think about that?
ANSWER: In Connecticut, the State Department of Social Services says that adding someone else’s name to a bank account does not transfer ownership of that account. If Mrs. Jones had a bank account with $20,000 and she added her daughter’s name to the account, the state would say her daughter’s name was added for convenience purposes only. In other words, the entire account still belongs to Mrs. Jones. So even though the child’s name has been added, the practical effect, from a Medicaid (Title 19) standpoint, is that there has been no gift and the entire account still belongs to Mrs. Jones.
Many people believe that joint accounts are a good way to avoid probate and transfer money to loved ones, and 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 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 that the applicant owns the entire 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.
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 use the money in the joint account to pay off your daughter’s debt.
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 take money out 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 that 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.