Estate Planning, Less is More…More or Less

estate planning

As an estate planning and elder law attorney, I have often urged my clients to consider consolidating their bank accounts, for several reasons.

  1. First, it makes your life easier.
  2. Second, if you become unable to manage your financial affairs, the person you have named in your Durable Power of Attorney will have a much tougher job.
  3. Third, multiple accounts can create a paperwork nightmare if you ever need to apply for Medicaid. As part of the Medicaid application process, you must provide all account statements for each and every account in your name (even those held jointly with another person) for the prior 5 years. Obtaining 60 months’ worth of statements for one account can be a chore. Can you imagine how difficult it becomes when there are multiple accounts and you make transfers among those accounts?
  4. Finally, following your death it is much easier for your Executor to manage an estate where the assets are consolidated into few accounts.

I am not recommending that you use only one bank, especially if you have substantial assets. You are probably already aware of the FDIC limit of $250,000 per person, per bank in the event that the bank fails.

Another advantage of using more than one financial institution is the possibility that a bank may take it upon itself to “freeze” your account, without your consent or knowledge, upon mere suspicions of incapacity or undue influence.

In some cases, the financial institution’s antennae are raised when a friend or family member of the account-holder calls the bank manager or financial advisor alleging that the individual is mentally incapacitated. In other cases, the financial advisor may receive what he considers to be conflicting instructions from a confused account-holder and assumes that the individual is being taken advantage of. In the most egregious of cases, the elderly account-holder fires the financial advisor and requests that his funds be transferred to another financial institution.

Despite the fact that these financial institutions and their employees do not have the medical training required to assess their clients’ mental capacity or the expertise (let alone the authority) to apply the legal standard for incapacity, financial institutions are locking clients out of their own accounts and getting away with it. Some financial institutions have even established “elder abuse units” and tout this practice as being worthy of praise, arguing that they are simply being proactive in order to protect their clients’ best interests.

In instances where financial abuse is occurring, a temporary freeze on an individual’s account may help to protect the individual’s assets until a more permanent solution can be found (although a freeze might also do more harm to the account- holder). But if the bank or financial advisor’s judgment is in error, the negative effects of an account freeze can be life-altering for the account-holder.

This is particularly the case where an individual has all of his assets with a single financial institution and consequently cannot pay his bills because he is restricted from accessing any of his assets. In extreme cases the account-holder can be forced to spend thousands of dollars in legal fees to litigate in court in order to regain access to his own account!

So while I still suggest to my clients that it is a good idea to minimize the number of accounts that they have, I make sure that they consider having assets with at least two different financial institutions so that they are able to pay their bills in the event that one of their accounts are frozen.

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About Pamela Quattrone

Pamela A. Quattrone, Esq., MBA is an Associate attorney at the Law Offices of Nancy M. Rice. Pamela dedicates her practice to estate, tax and long-term care planning, estate administration, guardianship, and litigation related to each of these areas. She also works with individuals and their families to address asset-preservation issues and long-term care concerns.​Rice Elder Law.

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