How to Avoid Probate (and Family Fights) Over a Bank Account

A big part of our job is helping people avoid the Arkansas probate process.

One of the ways we help people avoid probate is changing information about personal bank accounts. If you die and you’re the only person on your bank account, your heirs will not be passing go or collecting any money. Instead, they’ll go straight to probate. So, it’s important to have another person on a bank account before your death if you want to avoid probate.bank account death

So you want to avoid probate—good. But now that you have this information, you may be thinking to yourself, “I can do that myself—lawyers are just too darn expensive.” Well, you might be able to do it yourself, that’s true. But we have seen too many instances where people mess things up to recommend it.

Some more information you might find helpful:

How to access a bank account when someone dies. 

What to do when someone dies. 

Here’s a fairly common example:

Mom has three kids: Andy, Becky, and Charlie. Andy lives in Little Rock, while Becky and Charlie live far away. Mom starts having heath problems, so she goes to the bank to put Andy on her bank account because she wants Andy to be able to sign checks on her behalf.

When Mom shows up at the bank, she immediately walks up to the first available teller. Does this teller understand Arkansas probate law? Perhaps, but I have yet to meet that particular teller. The teller adds Andy as a joint owner with Mom on her bank account without any explanation about what that means and without explaining the different options.

Mom never knew that there are four ways to add someone to your bank account:

  1. Joint Owner with survivorship
  2. Joint Owner as tenants in common
  3. As a signor
  4. As a beneficiary

In our story, the teller added Andy as a joint owner. Six months later, Mom passes away. Andy is sitting on $60,000 in Mom’s account, all of which is his. He owns it just as much as Mom did before she died.

In a perfect world, Andy divides the $60,000 up according to Mom’s wishes, but things are rarely perfect. Andy’s son got in some trouble, and Andy needed the money to help him out. Andy’s not necessarily a bad guy, but like all dads he’s going to use that money to help his son. Becky and Charlie get nothing.

“Yes,” you say, “but our Mom has a will that divides property evenly among the three siblings.” That may be true, but that money in that checking account no longer belongs to your Mom. Even if Mom expressly mentioned the bank account in the will, the will cannot touch it. It did not pass to her estate, to be divided in the will; instead, it went straight to Andy.

Can you then challenge Andy’s ownership of the account? Of course, but that will require a lawyer to prove that Andy exerted some sort of undue influence over your mother. That’s a hard sell and a lot of attorney’s fees.

What should have happened? Mom should have added Andy as a signor on her account and added Andy, Bob, and Charlie as beneficiaries on the bank account. Then Andy can pay bills and take care of Mom and the money would be split evenly upon her death, without going to probate.

Most probate-avoidance issues are this way. A little bit of advice before you act usually saves you a lot of money in the end. In this case, a few hundred bucks could have saved Becky and Charlie $20,000 a piece.

That’s our business model. We charge you a reasonable fee to help you do the most important things that will end up saving you a bundle in the end.

Also, see a good estate planning attorney before it starts!