The Right Way to Title Bank, Credit Union and Other Accounts

by Karl on February 18, 2013[printfriendly]


The Patriot Act was signed into law by President George W. Bush on October 26, 2001 after the attacks of 9/11. The effects of this law are often overlooked in long-term care crisis planning. In fact, it can become a major obstacle in protecting assets from the devastating cost of nursing home and sub-acute facility care.

The monthly cost for a nursing home in Los Angeles County runs from $6,000 to $8,000 per month. The monthly cost in a sub-acute facility ranges from $26,000 to $37,000 per month! Because this is for long-term care, Medicare and health insurance do not cover these costs. The monthly costs must be paid for out-of-pocket, by long-term care insurance or by Medi-Cal.

It is very easy to see that a person or family can quickly go broke if a health care crisis like a stroke, fall, Alzheimer’s or dementia happens. The correct titling of accounts is imperative to making sure that cash can be transferred easily between accounts.

Before the Patriot Act, if you closed an account titled in the name of your living trust at one of the major brokerage firms, the check would be made payable to your living trust. That check could be deposited in a bank account titled jointly or individually.   

Now, that same check has to be deposited in a bank account titled in the name of your living trust. It can no longer be deposited into a joint or individually titled account.

To see the negative effects this can have, let’s take a look at an example of a widow who has Alzheimer’s, is no longer legally competent and has a daughter taking care of her finances.
Mom has a $100,000 brokerage account titled in the name of her living trust and a checking account at the bank titled in her name only.

Mom is in a nursing home and her daughter is able to close her brokerage account. The brokerage firm issues a check in the name of mom’s living trust. Daughter tries to deposit it into mom’s checking account but can’t because the checking account is not titled in the name of the living trust.

Mom can’t open a new account because of her Alzheimer’s. Her daughter has a major problem.

This is how mom should have set up her accounts.
The brokerage account should have been titled in her name TOD (Transfer on Death). When the account is closed, the check will be issued in her name only. Should she die, her daughter is the beneficiary of the account and it will bypass probate.

The check can now be deposited into mom’s individually titled bank account. Her daughter needs to be designated as the Limited Power of Attorney at the bank. This allows her daughter to sign checks and manage her account at the bank if she becomes incapacitated.

Her daughter also needs to be the beneficiary (Pay on Death or POD) of the account. Should mom pass away, her daughter would receive the account proceeds probate free. 

Daughter could also have been set up as a joint tenant with rights of survivorship on the bank account. But this means that mom’s account is also 100% her daughter’s. If daughter is sued or divorced, the creditor’s can go after all of mom’s money.

It pays to make sure that accounts are titled properly to avoid huge problems later.

Karl Kim, CFP, CLTC is the President of Retirement Planning Advisors, Inc. and is a Medi-Cal specialist. His office is located in La Mirada, CA and can be reached at 714-994-0599 or at He has submitted over 1000 applications with a 99.9% success rate over the past twenty years. This is meant to be an educational article. Do not make any decisions solely on the information contained herein. Consult your tax advisor, financial planner and attorney before taking any action. We are not responsible for any inaccuracies or misinformation.

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