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Power of Attorney vs. Joint Accounts: Making the Right Choice

Author: Philippe Richer

Many people assume that adding a family member as a joint account holder is the simplest way to ensure their finances can be managed if they become unable to do so. However, this common approach can create unexpected complications, even between spouses.

Consider this scenario: Your spouse is hospitalized, and you need to make urgent changes to your joint investment account. Despite being a joint owner, you might hear: “We need authorization from both account holders to proceed.” Without a Power of Attorney (POA), you could find yourself facing unnecessary obstacles during an already stressful time.

A POA offers several advantages over joint ownership:

Financial Control 

A POA allows you to maintain full ownership of your assets while giving your chosen representative the legal authority to act on your behalf when needed. Unlike joint accounts, it doesn’t require you to transfer ownership of your assets.

Clear Legal Authority 

Financial institutions are familiar with POAs and have established processes for working with them. This often means smoother transactions when your representative needs to step in and help.

Estate Protection 

Joint accounts can unintentionally interfere with your estate plans, as the funds automatically pass to the joint owner upon death. A POA, however, ends when you pass away, ensuring your estate is distributed according to your wishes.

Tax Implications

Tax Implications Adding someone as a joint owner to your property could trigger capital gains tax implications. A POA, on the other hand, allows someone to help manage your affairs without these potential tax consequences.

While joint accounts can serve specific purposes, they shouldn’t be viewed as a substitute for a properly drafted POA. A POA provides the protection you need without compromising control of your assets or complicating your estate plans.

Before making decisions about joint accounts or POAs, consider speaking with a legal professional who can help you understand which options best suit your specific situation. Ready to protect your financial future with a proper Power of Attorney? Contact our firm today to get started.

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