Many Louisiana residents add one or more children to their checking and/or savings accounts for various reasons. The three most common reasons this is done is to
- Provide easy access to the account if the parent becomes incapacitated,
- To allow this account to transfer to the child at the parent’s death thereby avoiding probate, and
- To protect the account from Medicaid spend-down if you need long-term care.
Adding a child’s name to an account will only facilitate the child’s access to the account while you are alive. If 100% of the funds in the account are from the parent, the entire account goes through probate. The account does not automatically transfer to the child named on the account after your death. The new owner will be determined by your will or the intestacy laws. In addition 100% of the funds will be subject to Medicaid spend down unless the child can prove they put part of the money into the account. Merely adding a child’s name to an account will not transfer ownership.
There is an easy solution to avoid probate with your checking and savings accounts. Louisiana allows certain financial institutions (e.g. banks, savings and loan associations, credit unions) to provide accounts with payable on death (POD) or survivorship designations.[i] These statutes relieve the financial institution from liability for distributing the assets to the survivor named on the account (the POD designee). Although the financial institution may distribute funds to the POD beneficiary, a POD designation does not determine ownership. In Louisiana, the law does not prevent an individual from enforcing a property right against the person to whom the account was paid. For example, Boudreaux contributes $50,000 of community property assets to a certificate of deposit POD to Pierre, his child from a prior marriage. Upon Boudreaux’s death, the financial institution will distribute the entire $50,000 to Pierre. Because the money used to open the account was community property, Boudreaux’s wife, Clotile, may enforce her community property rights of half of the account value. Clotile would have to seek a remedy from Pierre rather than the financial institution. A forced heir may also seek a remedy for their portion of funds paid to a POD beneficiary.
Although POD designations may not be a perfect solution to avoiding probate, it will work as planned in many situations. Louisiana law currently does not allow transfer on death (TOD) registrations for brokerage accounts. Currently, forty-eight states and the District of Columbia have enacted TOD legislation to facilitate the transfer of investment securities. If you wish to avoid probate for investment securities or other assets you will have to rely on a revocable living trust.
Contact attorney John Sirois today, if you have questions about POD accounts and avoiding probate. Contact John Sirois at 985-580-2520 or by email.
