Parents often put their children’s names on their accounts so that they can pay their bills if they cannot do so on their own. This also allows the child to access the money once the parent dies and often times the bank officer dealing with your accounts may even advise you to do it. But, did you realize that joint accounts do not always work in your best interest?…
Why joint accounts can be a bad thing
If you have other children, they will most likely not receive any money from the account as it will all go to the child listed on the account. This holds true even if you have a will or trust that says something to the contrary! A joint account will exclude the other children from having access to it if you were to die.
Having a joint account also means the child can pull money from it at any time without the parents consent. Most parents often correctly believe that their child would never steal from them, but it happens.
Another frightening aspect is the account belonging to both of you also makes it subjected to the debts of both parties.
This means that:
- If the child comes down with an unexpected illness your money is at risk.
- If the child injures a person in an auto accident your money is at risk.
- If the child gets divorced, then the joint account can be considered property that has to be split.
What you should do instead
It’s best to not add your child’s name to any of your property. Even if the bank recommends it, they do not understand all the downsides of it. If you are concerned about paying bills, then you can have your child authorized for signature authority on your account. Better yet you can appoint your child as your durable power of attorney. Your child can then use your money in ways that benefit you while protecting your money from your child’s creditors and predators.
It may also be useful to add a “Pay on Death” provision to your account. This will allow your child or children to receive your money upon death without going through probate.
If you are dealing with transferring or sharing an account or property it’s best to contact your local elder law attorney. We are here to help you understand the best possibilities with your finances and assets.