Dear Regina:
The possibility of losing your accounts in your son's divorce depends on your son's participation and control of your accounts. In Minnesota, we have a statute called the Multi-Party Accounts Act that says that a "joint account belongs, during the lifetime of all parties, to the parties in proportion to the net contributions by each to the sums on deposit." Minn. Stat. § 524.6-203(a). If your son did not deposit money into the account, but was merely named on the account in case you were incapacitated, then a divorce judge would probably deem the account to be your asset and won't include it in the divorce assets. However, it may be hard to prove that only you deposited money into the account. As you did not provide information as to what money is in your accounts, I do not know if the deposits are traceable funds. If you have direct deposits of your income, such as Social Security, those funds are clearly traceable to you. However, if there are deposits of cash, or deposits of unclear origin, it may be difficult to prove that money was yours. You should speak with your son directly to address this issue.
Besides divorce, this problematic situation also arises if your joint owner owes debt to creditors or other entities or goes through bankruptcy. I have seen cases where a client's bank account was garnished simply because our client's child owed a judgment for credit card debt and the child was listed as a joint owner of the account. The judgment creditor does not know that the child doesn't contribute money into the account. All they see is that the child's name is listed as a co-owner. Fortunately, we have been successful in stopping these garnishments because the only money going into the account was from our client.
Thus, it is wise to not name a person as a joint owner on your accounts if there is any possibility that your prospective joint owner may owe debts he or she cannot pay, or may go through a divorce. Instead, fortunately, you can do other things to accomplish your goal of having help with your finances should you become incapacitated and avoiding probate.
One way to allow someone to help you manage your accounts and assets during your lifetime would be to have a Power of Attorney for Financial and Property Matters (POA). You can name an agent (also known as an "attorney-in-fact") under the POA to act for you in your financial matters. Your agent can be any adult that you trust, such as your son. The agent can sign your checks as your agent under the Power of Attorney. Your agent has no authority to use your money or assets to pay their own debts or judgments as such acts would not be in your best interests. Since your agent can access your bank account just as you can, there is no need to name the agent as a joint owner of the account. If your agent is not named as a joint owner, your agent's creditors cannot garnish your account to try to collect on your agent's debts. Similarly, if your agent goes through a divorce, your account will not be considered an asset of your agent because he is not a named owner of the account.
To avoid probate, you may name one or more people as a beneficiary on your accounts, so that they will automatically own the account upon your death. Your beneficiary has no control over or access to your account while you are alive. For a checking or savings account, the beneficiary is called the "payable on death" or "POD" beneficiary. For other accounts, it could be called a "transferable on death" or "TOD" beneficiary. You can change the beneficiary at any time while you have the capacity to do so. The nice thing about POD account is that the beneficiary does not own a current interest in the account and the account cannot be invaded for judgments, collections or other liabilities of the beneficiary.
Please speak with an attorney if you have any questions about your specific situation.
