You've heard that adding your daughter's name to your checking account will help her pay bills if something happens to you. Or maybe a friend suggested titling your brokerage account jointly with your son so he can handle your investments. These arrangements, called Joint Tenants with Right of Survivorship (JTWROS), sound practical and simple. But, what works for real estate doesn't always translate to financial assets.
JTWROS allows two or more people to own an asset together, with ownership automatically passing to the surviving owner when one dies. While JTWROS usually avoids probate for that particular asset, those funds may still be subject to estate debts and tax apportionment if other assets are insufficient. Before you add anyone's name to a bank account, investment portfolio, or vehicle title, ask your Texarkana estate planning attorney to explain the strategic uses and the serious pitfalls of joint ownership for financial assets.
How Texas and Arkansas Differ on Creating Survivorship Rights
Not every account with two names automatically creates survivorship rights. The exact language on your signature card and account agreement determines whether you've created JTWROS or something else entirely.
Texas Requires Specific Language
Texas law does not presume survivorship just because two names are on an account. To create survivorship rights, there must be explicit survivorship language in a written agreement signed by the person who dies.
Texas law specifically recognizes "convenience accounts," where a convenience signer can transact on the account but does not own the funds and has no survivorship rights. This gives you a middle option: Mom can add a signer for bill-paying without giving away ownership or survivorship.
Texas is also a community property state, which adds another layer of consideration. Property acquired during marriage is presumed to be community property, owned equally by both spouses. When you add a spouse to an account funded with community property, the analysis differs from adding an adult child to an account funded with your separate property.
Arkansas Takes a Different Approach
Arkansas has its own statutory scheme for multiple-party deposit accounts at banks. If a multiple-party deposit account does not expressly designate tenants in common, payable on death (POD), or trust status, Arkansas law generally treats it as joint tenants with right of survivorship by default. This differs substantially from Texas requirements, where survivorship language must always be explicit and is not presumed.
For families with property or accounts in both states, common in the Texarkana area, understanding these differences becomes critical. What you assume about your account structure may not match the legal reality under your state's specific statutes.
Where JTWROS Actually Makes Sense for Financial Assets
Joint tenancy with right of survivorship serves legitimate purposes when used strategically and with full awareness of the implications. The key is matching the tool to the specific situation.
Bank Accounts for Immediate Access
Joint checking accounts with JTWROS can provide practical benefits when a trusted person needs immediate access to funds for specific purposes. Under state multiple-party account laws, financial institutions typically must honor the authority of any account holder to access funds.
This arrangement also affects FDIC insurance coverage. Joint accounts are insured by the FDIC up to $250,000 per co-owner, per bank, in the joint-account category. This can be a benefit for families with substantial deposits who want to maximize insurance protection.
Brokerage Accounts for Active Investments
Joint ownership of investment accounts occasionally serves families when an adult child actively manages a parent's investments with their knowledge and participation. State law and account agreements determine how jointly held securities pass at death.
Joint brokerage accounts are also a separate "capacity" for Securities Investor Protection Corporation (SIPC), which currently protects up to $500,000 per capacity, including up to $250,000 in cash, if a SIPC-member brokerage fails. Understanding these protections helps families make informed decisions about account structure.
Vehicles for Shared Family Use
Vehicle titles with JTWROS serve limited but genuine purposes, particularly in rural areas where family members share trucks, tractors, or equipment for farm or ranch operations. Titling vehicles with JTWROS allows either person to handle registration renewals, insurance claims, and necessary repairs without constantly involving the other.
However, adding a child to a vehicle title "just in case" when that child doesn't actively use the vehicle creates the same creditor exposure and unintended consequences as adding names to financial accounts without genuine shared use.
The Hidden Dangers of Joint Ownership
What seems like a simple solution often creates cascading problems that don't appear until it's too late to fix them. The Elder Law and Estate Planning Attorneys at Ross & Shoalmire, P.L.L.C. regularly help families untangle poorly structured JTWROS arrangements and resolve disputes over joint accounts.
Assets Held as JTWROS Pass Outside Your Will
Assets held as JTWROS or with survivorship generally pass outside the will, straight to the surviving co-owner, even if the will says "divide everything equally among my children." Your carefully drafted will controls only probate assets. Joint accounts, POD designations, and JTWROS property bypass probate and go directly to the named survivor or beneficiary, regardless of what your will says.
This creates surprises for families who assumed everything would be divided equally. When Dad puts only one child on his $200,000 savings account "for convenience," that child legally owns the entire account at Dad's death, even if Dad's will says to split everything three ways among all his children. The other siblings have no legal claim to those funds.
Your Co-Owner's Creditors Can Reach Your Money
The moment you add someone's name to your account, their creditors may be able to reach that person's interest in the joint property. A co-owner's creditors can potentially execute against the debtor's interest in jointly-held accounts.
Hypothetically, suppose Janet in Hot Springs added her daughter Amy to her $120,000 savings account for convenience. Three months later, Amy's small business failed, leaving her with $85,000 in unpaid supplier debts. The creditors obtained a judgment and discovered the joint bank account. Although Janet deposited every penny from her own retirement funds, Amy is a legal co-owner, potentially giving creditors access to her interest.
Unintended Gift Tax Consequences
Adding someone as a joint owner can create a taxable gift, especially for investment accounts, and may require a gift tax return if the transfer exceeds the annual exclusion. The exact timing and amount of the gift can depend on the type of account and when the new owner actually uses the funds.
Say, for example, that Harold in Magnolia adds his grandson Eric to his $200,000 brokerage account. For investment accounts, there can be an immediate gift for tax purposes. If Harold is treated as making a substantial gift to Eric, he may need to file Form 709 (United States Gift Tax Return).
Family Disputes Over Control and Access
Joint ownership gives each person full legal authority to access and control the entire account. Any joint tenant can withdraw all funds without the other tenant's permission, creating enormous potential for family conflict and financial abuse. Ross & Shoalmire, P.L.L.C. regularly represents families dealing with disputes over joint accounts and financial exploitation cases where JTWROS arrangements enabled abuse.
Medicaid Planning Gets Destroyed
Adding someone to your account within five years can be treated as a transfer for Medicaid purposes and may create eligibility problems. Under federal Medicaid law, transferring assets for less than fair market value triggers penalties that delay coverage. Federal rules impose a 60-month look-back period for long-term care Medicaid eligibility.
While you're still alive, Medicaid often treats the full balance of a joint account as the applicant's countable resource unless you can prove otherwise. Our firm's experience with Medicaid Planning shows that last-minute joint titling causes some of the most devastating and avoidable problems for families in crisis.
Better Alternatives That Avoid These Problems
You can achieve your practical goals without the legal complications of JTWROS. These alternatives provide access or automatic transfer without making someone a legal co-owner.
Beneficiary Designation
Texas and Arkansas law allow Transfer on Death (TOD) and Payable on Death (POD) designations for many accounts, so assets can pass outside probate without creating current co-ownership.
TOD and POD designations require careful coordination with your overall estate plan. These designations must align with your will or trust to avoid conflicts between what your will says and what your beneficiary designations accomplish. Not every financial institution offers TOD for every type of asset, and you must periodically review and update these designations after deaths, divorces, or births to keep them current.
Durable Power of Attorney
A properly drafted Durable Power of Attorney grants someone authority to handle your financial affairs without making them a co-owner. The Power of Attorney can include restrictions, like allowing deposits and bill payments but prohibiting withdrawals over $500, providing protection against financial abuse.
Revocable Living Trust
For families with multiple accounts and substantial assets, a Revocable Living Trust provides comprehensive solutions. You maintain complete control during your lifetime, designate a successor trustee to manage assets if you become incapacitated, and specify exactly how assets should be distributed at your death.
Working With Your Texas JTWROS Planning Attorney
Coming to your appointment prepared to discuss your situation and goals makes the conversation more productive. Focus on:
- What you're trying to accomplish
- Who's involved and why
- The size and type of your assets
- Your timeline and health status
- Your concerns about specific scenarios
Be candid about family dynamics and financial situations. If your daughter is going through a divorce or your son has creditor issues, your Estate Planning Attorney needs this information to protect your assets. These are relevant legal facts affecting planning strategies.
With decades of experience correcting poorly structured JTWROS arrangements and handling Medicaid problems caused by last-minute joint titling, Ross & Shoalmire, P.L.L.C. understands both the strategic uses and the serious pitfalls of joint ownership planning. Whether you're planning ahead or dealing with an immediate crisis, professional legal guidance helps you avoid costly mistakes and protect your assets for the people and purposes you care about.
