What Happens to a Joint Account When Someone Goes Into Care?

A joint account is a financial arrangement where two or more individuals share ownership and access. Commonly used by family members or business partners, these accounts manage shared finances. Going into care refers to the need for long-term support due to age, illness, or disability, often in a nursing home or assisted living facility. When a joint account holder requires such care, the shared finances introduce complexities in asset assessment and management.

Understanding Joint Account Ownership

Financial assets can be held in various joint ownership structures, each with distinct legal characteristics. These structures dictate how funds are accessed, managed, and distributed, especially upon an account holder’s death. Understanding these distinctions is foundational when considering long-term care.

One common type is Joint Tenancy with Right of Survivorship (JTWROS). In this arrangement, all co-owners have equal rights to the entire account. If one account holder passes away, their share automatically transfers to the surviving joint tenant(s) without probate, allowing seamless transfer of ownership and continued access for the surviving owner.

Another form is Tenants in Common (TIC), where each owner holds a distinct, often unequal, share. Unlike JTWROS, there is no right of survivorship. Upon a tenant in common’s death, their share becomes part of their estate, subject to their will or state probate laws, and is distributed to their heirs.

Tenancy by the Entirety is a specific joint ownership type for married couples in some jurisdictions. This form provides protections, such as shielding the asset from one spouse’s individual debts, and includes the right of survivorship. While these ownership types dictate how funds are held and transferred upon death, they do not inherently address asset treatment when one owner requires long-term care.

Joint Accounts and Eligibility for Care Assistance

Funds in joint accounts are assessed for long-term care assistance programs like Medicaid. As a needs-based program, Medicaid requires applicants to meet income and asset limits to qualify.

Medicaid presumes 100 percent of joint bank account funds belong to the applicant, regardless of who contributed. The burden of proof falls on the applicant or their representative to demonstrate that some portion belongs to the non-applicant joint owner. Without such evidence, the full amount counts toward the applicant’s asset limit, typically around $2,000 for a single individual.

Medicaid employs a 60-month (five-year) look-back period preceding the application date. During this period, all financial transactions, including joint accounts, are reviewed. Transfers for less than fair market value can result in a penalty period of Medicaid ineligibility.

For married couples, “spousal impoverishment” rules prevent the community spouse (the one not needing long-term care) from becoming financially destitute. These rules allow the community spouse to retain a portion of combined assets, known as the Community Spouse Resource Allowance (CSRA). For 2025, the CSRA ranges from approximately $31,584 to $157,920, with states setting specific limits within this federal range.

The community spouse may also be entitled to a Minimum Monthly Maintenance Needs Allowance (MMMNA) from the institutionalized spouse’s income. For 2025, the MMMNA ranges from approximately $2,644 to $3,948 per month, ensuring the community spouse has sufficient income. These provisions balance the applicant’s need for care assistance with their spouse’s financial well-being.

Accessing and Managing Funds with Incapacity

When an account holder enters long-term care, cognitive decline can lead to incapacity, complicating joint account management. While a healthy joint owner typically retains access, banks may restrict or freeze accounts if aware of incapacity, especially if the incapacitated individual was the primary contributor or if exploitation is a concern.

A Durable Power of Attorney (POA) for finances grants a designated agent authority to manage financial affairs on behalf of the principal, even if incapacitated. This document is crucial for seamless access and management of joint accounts when one owner can no longer make financial decisions. The agent can perform tasks like paying bills, making deposits, and managing investments, as outlined in the POA.

A Durable POA must be established before an individual becomes incapacitated, as it cannot be created once decision-making capacity is lost. Without a POA, obtaining legal authority to manage finances typically requires a court-appointed guardianship or conservatorship. This legal process is often more time-consuming, costly, and public.

Guardianship proceedings involve the court determining incapacity and appointing a guardian or conservator to oversee financial and personal matters. This complex process can delay access to funds. Proactive planning with a Durable POA ensures uninterrupted financial management and avoids legal complications.

Implications of Asset Transfers

Transferring assets from a joint account when long-term care costs are a consideration can have significant financial consequences. These transfers are closely scrutinized, especially if they occur within the Medicaid look-back period, as they may be viewed as an attempt to divest assets to qualify for assistance.

A “transfer for less than fair market value” occurs when assets, such as joint account funds, are given away or sold for less than their true worth. This includes gifting money or removing an individual’s name from an account without equivalent compensation. If such a transfer happens during the look-back period, it can trigger a penalty period of Medicaid ineligibility.

The penalty period’s duration is calculated by dividing the uncompensated value of the transferred asset by the state’s average monthly nursing home care cost at application. For example, a $50,000 transfer with a $5,000 average monthly cost results in a 10-month penalty. During this time, the individual must cover care costs out-of-pocket.

Even if funds are transferred, they may still be considered an “available resource” if the transfer did not follow specific rules or if the applicant retains access or control. These rules prevent individuals from artificially lowering countable assets to qualify for public assistance. Such transfers can lead to significant delays in receiving care assistance.