Sunday 11th May, 2008


Single benefits on joint accounts

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Speaking in Barbados Wednesday, at the annual Congress of Caribbean Insurance and Financial Advisers, Walton Rogers of the Million-Dollar Round Table focused on the tendency of people to move towards their dominant thoughts until they become what they think.

He was speaking about what people do within the realms of seven overlapping circles that make up the whole person. These circles represent family, education, health, career, service, spirituality and finances.

Dr Wayne Henry, Jamaican economist, who also spoke that day, made the point that we must have a healthy working sense of identity. Where vision is clear, he said, sacrifice is easier.

In financial matters, a sense of where you are going is critical to getting there. And when you get what you want, you need to know what to do with it.

This is where estate planning becomes important. Estate planning is the ability to understand how to own an asset, how to title ownership of an asset and how to pass it on to heirs.

Last week, we looked at the beneficiary designation. Today, we will examine how ownership of certain other assets, like bank accounts, can be misunderstood.

You can have an account that is owned by one person only or two people jointly.

But there are two kinds of joint accounts: where each person owns 50 per cent of the account balance or either person can own all of the account, with the ability to draw out the entire balance.

When only one person owns the account, on the death of the owner, the account is frozen. No one can access the funds in the account.

I once knew a widow who could not access money to bury her husband because her name was not on the account—the account was frozen.

She borrowed money to pay for the funeral.

I know of another widow who was called in by the bankers to immediately pay off the mortgage and the motor vehicle loan, when they learned her husband had died.

He died without a will, and although he had substantial sums in another bank, she had no access to the money.

I know another widow who could not get the insurance on her husband’s motorcar renewed, with the same discounts, when the insurer learned that the owner had died.

In this case, the car was not the property of the wife. The insurer did issue a renewal certificate eventually, in the name of the estate of the deceased.

When she thought she could sell the car that was sitting idle in her garage for one year, she couldn’t; it didn’t belong to her.

When the estate was settled in favour of the wife and she became the legal owner of the car, the premium was almost three times higher, because she was now a first-time insured without any no-claim discounts.

These problems can be avoided by a simple plan, designed to transfer ownership, in the years before retirement, the usual precursor to death.

For younger couples, trust is an important element in family life. Joint ownership requires high levels of trust and commitment. This is what builds a family.

Young couples exert time, energy and money to create an estate from scratch, because family is important; hence the planning to provide for and preserve the family is a dominant theme, ringing true to the whole person concept.