POA vs. Joint Accounts

Video

Good morning, folks. It’s Andy Stautz at Stautz Law, and I am recording a talk about a common estate planning and probate issue that I see a lot. This is a follow-up to my previous video on the difference between joint bank accounts and transfer on death or payable on death bank accounts.  

Today’s topic, closely related, is what’s the difference between having a joint bank account and having a power of attorney designate an attorney-in-fact for you. And this is a key difference. I think people get tripped up a lot, so it helps to clarify.  

What’s the Difference Between a POA and a Joint Bank Account?

So very basics, right? A joint bank account is you’ve got a bank account and you’ve got someone else on the bank account with you. So you are both account holders, okay? That’s what a joint bank account is.  

A power of attorney is a document that gives someone else financial powers to act on your behalf. And that person is called your attorney in fact. We’ve gone over this in other videos, so if you want a deep dive into powers of attorney, that’s where you should go.  

But basics, basics, your attorney in fact can be you within the scope of, you know, the powers given in the power of attorney document.

Key Difference: Who is Acting?

And that’s the big difference, right? So your attorney in fact is you when they carry out, when they do things on your behalf, when they do things using their powers.  

A joint account holder is not you, right? They have access to the money in your joint account. But if they use it to pay a bill, it’s still that other person paying a bill.  

Or if they need to deal with the bank, it’s them dealing with the bank. So they can do things like utility bills, right?  

Common Scenario for POA vs Joint Account

Probably the most common situation is someone has an adult child who takes care of their monthly routine finances as they get older. Very common set. You can do that from a joint bank account, right? You can have your pension come into a joint bank account and your adult child be a joint account holder and have the adult child draw money from your joint account to pay your utility bills. That’s great and it works, right? The bills get paid, but it’s still just your… it’s still just your joint account holder paying for you, like, on your behalf. It’s not you paying the account. It doesn’t make a difference for utilities, right?  

And so it might work for a while, but when you need to do more complicated transactions or you’ve got other issues in your financial life, then, you know, your joint account holder doesn’t have any broader powers, right? All your joint account holder does is shares access to and control over, you know, whatever account they’re on.  

So just because . . . . or one thing I have to revise in a lot of clients estate plan is they say, okay, Andy, I’m all set up because, you know, my grown-up son is on my joint account. We’re fine. And I have to say, no, not necessarily, right?  

How to Decide if You Need a POA

You need to think about What other things do you do right now for yourself that you might need someone else to do for you in the future? Right? If you get older and you don’t have time to deal with it, you suffer a health crisis.  

And that’s where the power of attorney is a more powerful document because it can give your attorney-in-fact more powers to deal with retirement accounts or deal with pensions or deal with taxes. Right? That’s a big one. So they’re not equivalent. Even if in the most common situation, they seem to work the same, we need to keep those concepts separate because they’ve got different effects, especially kind of in emergencies, right, in the big situations.  

Conclusion

So that was a general informational talk. I hope you enjoyed it. Obviously, you know, information about big concepts like this isn’t legal advice for your situation, right? So You need to call me or call another attorney and talk about what you need to get specific advice for your situation. You’re on my site, you’ve got my phone number, my e-mail, my online booking page. I’d love to talk if you need more help understanding this concept or talking through what you might need for your estate planning. Thank you for watching and bye for now.