In 1991, New York State passed a law creating convenience accounts. A convenience account is usually set up by a senior to allow another person who is named on the account to sign checks and make withdrawals solely for the benefit of the senior citizen who created the account. The purpose for the creation of convenience accounts is to avoid problems caused by the second person placed on an account improperly using the funds in the account to enrich themselves to the detriment of the senior who placed the funds in the account. When the senior citizen who creates the account dies, the money in the account goes into his or her estate and does not become the property of the other individual named on the account.
Help Paying Bills
It is fairly common for senior citizens to add one of their children to a joint savings and/or checking account to help them pay their bills and everyday expenses. Sometimes when a child isn’t available, or isn’t reliable or trustworthy, seniors’ name grandchildren and/or other friends or relatives as joint account holders on their checking and savings accounts. When this action is taken, the joint account holder has the right to keep the money in the account and/or withdraw and spend the money for any purpose whatsoever. When the individual who made the account dies, the joint holder inherits all of the money in the account.
Appropriate Actions vs. Inappropriate Actions
If the child or grandchild is a good person and uses the account solely to pay the expenses of the senior, the situation works out well. However, there are numerous cases which I have personally witnessed, where the joint account holder secretes virtually all of the money on the account and spends it on themself. In some situations this makes the senior indigent.
Conclusion
Having a convenience account is an appropriate estate planning technique. However, the account should be truly a convenience account and not simply a joint account with a child or other loved one.
