Listen to Lawrence…Joint Bank Accounts

April 27, 2020


Dear clients and friends,

Here are a few more of your comments/questions and my responses:


“A possible future topic could be addressing the importance and timing of removing deceased parties from joint bank accounts and other legal documents. As a former banker, we often saw clients refuse to remove a deceased spouse from a joint account thinking it helps with their FDIC insurance coverage which is not the case.”


Joint ownership of a bank account is very common, especially among married people as well as parents and children. The benefits are that both have access to the account while living and the survivor will get the whole account at the first death without probate. While both joint owners are living, the account will enjoy two $250,000 FDIC insurance protections; but what happens at the first death?

My client and former banker correctly states above that the survivor will only receive one of the two $250,000 insurance protections beginning at the moment of the first death. Clearly, at the first death, there is only one owner and one $250,000 insurance protection.

However, anecdotally, I have heard that some surviving spouses keep the account open for about a year after the first death to have a practical place to deposit a small check that may come in the mail in the name of the decedent, preventing the need for a small probate. They deposit the check, signing the back “for deposit only.” As a lawyer, I cannot condone this practice, but I am told that people do this and it works. Of course, the correct way, and the way I advise all of my clients, is to bring a small estate proceeding in the probate court as long as the amount is under $50,000.


If I create a joint bank account with my daughter, will 1/2 the account be protected from Medicaid after the look back?


This is a major myth that never seems to go away. The answer is that if it is your money that was used to open the account, then it remains all your money from Medicaid’s point of view. There is no look back because there is no gift. You really didn’t give anything away. Of course, if your daughter withdraws money from the account, then a look back will start at that point.

On the other hand, the idea of a joint account seems to suggest that the account is all yours. So, if you can produce proof that your daughter supplied part or all of the money, then that amount will be excluded from your countable assets and protected from Medicaid. Guess how often this happens? 😊

I hope this helps.

Please pass this information to your family and friends and continue to keep your questions coming! If you are thinking about it, others are probably thinking about it too, so my answers will no doubt help you and many others. Let’s stay connected.