We’ve all done it – open a bank account. Simple, right? Yes, it’s a fairly simple process to establish a new checking or savings account. But does the account ownership complement your estate plan? Too often bank accounts are afterthoughts when they are incorporated into an estate plan, and much can go wrong when this is the case. Through a little preparation and purposeful actions, you can ensure you set up your bank accounts right the first time.

I was reminded of this lesson a few months ago. My son, Gus who is four, accomplished the mission of filling up his piggy bank. I couldn’t be more proud; all his hard work has paid off. He has wrangled off dollar bills from grandpa and he “helped” clean my car by simply raiding the center console for coins. It took him nearly four years, but it was finally time to dump it out, count his savings, and open a bank account. It was a proud moment for a financial planner.

First, I had to explain the piggy bank was a gift, and we couldn’t just smash it to count his money. Fortunately, the alternative of ferociously shaking the piggy bank seemed to be an acceptable second option. The next step was a tedious task of sorting and counting his savings. Luckily Gus was at the appropriate age and had fun working on his number skill development. For a four-year-old, Gus gave a noble effort trying to wrap the quarters, but I elected not to torture him and took the lead in wrapping the dimes. Once we counted and sorted the money, we headed to the bank to establish a bank account.

Fortunately, the hard part was behind us. My wife and I agreed that we wanted to open a savings account for our minor child; therefore, we needed to open a custodial account for our son. Since I drove Gus to the bank, I naturally would be custodian on the account. I had all of Gus’ personal information and mine, so we were all set to open his first bank account. Still a simple occurrence, but what happens if I were to die before Gus turns the age of majority?

It would be problematic if I were to die prior to Gus taking control of his account. Most state statutes allow a personal representative or trustee to name a successor custodian; however, it’s not always straightforward, and it likely would get caught up in court. We decided to do our best to avoid this situation by listing my wife as a successor custodian on the account application. Designating her as a successor custodian will allow her to easily control the account if something were to happen to me.

While you may not be opening up a custodial account, there are still a number of items to consider when opening up a bank account for yourself. So what questions should you ask yourself before opening an account, or better yet, talk with your attorney and/or financial planner?

1. What type of registration (account ownership) best complements your estate plan?  Should it be titled Individually, Joint Tenancy with Rights of Survivorship, Tenancy-in-Common,  Trust, Estate Custodial, etc?
2. What would happen to this account if I were to die?  Do I need beneficiaries listed via a Payable on Death Designation on the account or is it titled appropriately to accommodate my wishes?
3. How does it impact my estate plan?

With interest rates rising over the last few years more investors are starting to shop and compare banks. And while it is generally a good practice to re-evaluate your bank accounts and their prevailing interest rates, it’s likely not worth it if you may be inadvertently disrupting your estate plan.

Yes, it’s a simple process to establish a new checking account, savings account, money market, certificate of deposit (CD), etc. But it’s not necessarily easy to make sure if it complements your estate plan. Account registrations, and whether beneficiaries should be listed, require thoughtful consideration. Through a little preparation and purposeful actions, you can ensure you set up your bank accounts right the first time.