Before adding a joint account holder to your account, it would be wise to read about this recent New Jersey case which illustrates the risks involved when adding someone, even a close family member, to your account.
In Coiro v. Wachovia, 11-cv-3587, the recently widowed Josephine Coiro added her daughter to her checking account so the money could be accessed even if she became ill or would be unable to act. In April 2010, she sold her home and deposited the proceeds of $381,272 in the account. Five days later, her daughter filed Chapter 7 bankruptcy. Even though her daughter did not include the account as an asset, Wells Fargo, which monitors bankruptcy filings, froze it.
A day after notifying Coiro about the freeze, the Chapter 7 trustee at Wells Fargo authorized the bank to release half of the money to Corio and to send the remaining $190,508 to him. Coiro accused the bank of turning a profit by freezing joint accounts without prior notice, a practice she called equivalent to the bank’s granting itself “ex parte restraining orders on the funds of innocent third parties”. Wells Fargo claimed that section 4 of New Jersey’s Multiple Party Deposit Account Act creates a presumption of equal ownership in joint accounts.
After months of litigation, U.S. district judge Anne Thompson denied the banks motion to dismiss the charges, pointing out that the 50-50 presumption in the statute is only in absence of proof that one party contributed more than the other. Although Coiro won the case, it nonetheless highlights just some of the risks that can arise when adding a joint account holder. You should consult with your Urbach & Avraham financial advisor and attorney before making this important decision.