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Some Arrangements at the Bank Will Change Your Will or Revocable Trust. The accounts and services that banks provide are very important to your day-to-day affairs. However, the paperwork for your accounts and a number of the extra services that banks offer can affect how your estate is distributed after you pass away. If you have a Will, Revocable Trust or other estate plan that lays out how your assets will be distributed at death, you need to be careful about arrangements at the bank that extend beyond your lifetime. You are really on your own when you work with the bank. The bank will not review your Will or Revocable Trust before putting these things in place. The bank will not ask the kind of questions or give advice that will steer clear of trouble for your family. If you do not take special care, then the work that you do at the bank could end up being part of some problem that your family will need to solve later on.

2. Joint Accounts Are Not Alternatives to a Power of Attorney. A power of attorney is an arrangement where you name someone to help you with banking or other financial matters. With a power of attorney, your money still belongs to you. The person named in the power of attorney document must always act in your best interest. Sometimes, the bank or someone else will suggest creating a joint account or putting the child's name on the account as an alternative to the power of attorney. However, joint accounts are very different from a power of attorney. With a joint account you actually give up ownership of the money in the account. It is just like you made a gift and it is not really your money any more. This can have a major impact on your financial and legal affairs. Banks usually do not explain these very important differences between joint accounts and power of attorney. Some may minimize the risk and try to dismiss the idea that you would ever have a problem with the person whose name goes on the account. Unfortunately, nobody ever thinks they will have a problem. Yet, if a power of attorney will do the job just as well, there is no reason to take a chance.

3. Too Much of a Good Thing. Banks love to help you avoid probate. However, many people already have a plan for avoiding probate before the bank ever starts talking about it. The different tools and techniques that the bank offers to its customers can actually lead to confusion and potential problems for your family. This is especially true where the bank's help breaks up a simple, unified plan into a number of little pieces. Rearranging the plan in this way opens the door for errors and inconsistencies. It also can make your estate more difficult for your heirs to manage and understand after you pass away. It is certainly a case where a little help can do more damage than good.

4. Limits on What They Can Do. The bank's tools for estate planning are very limited. In some cases this is obvious. Some banks tell you that you can only name two of your children as a payable on death beneficiary. Most bank's forms also will not allow you to write down your full plan for your family. Other limitations are more subtle. You may discover how difficult it is to make changes to the payable on death designations. In addition following the bank's rules for distribution of the accounts is often not what you would expect. However, the most significant problem is the fact that you also have assets that are not in that particular bank. Banks cannot do anything to help you with other assets. The key is to recognize when the bank's limited tools are not a good match for you and your family. It is often better to say no to the bank's tools if it means changing your plan or settling for something less.

5. Avoiding More Than Probate. The bank's specialty when giving estate planning advice is avoiding probate. The truth is that it is easy to avoid probate and most people can do it with or without the bank's help. When people rely upon the bank's tools for estate planning they ultimately avoid not just probate, but other tools that could help their family. The heirs often are left looking for something to fill the void. The bank's tools do not provide any answers the family's questions, organization or process to address the many issues that always come up after a death. Your family can then experience confusion and frustration as they try to pull something together that will replace all of the things that the estate traditionally provides.

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This is not legal advice or tax advice, pursuant to disclaimer.
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