It is common for aging parents to make their adult children joint owners of their bank accounts. Parents usually have two goals when doing so: (1) ensure their bills are paid if and when they become ill; and (2) transfer the account balance to their children at death, without court involvement. But is making your adult child a joint owner the best and safest way to achieve those goals?
Joint bank accounts are owned equally by all who are named on the account. All can spend without question. You may not believe that your children would take your money without permission — but what if that child has financial problems? Is divorcing? Is sued?
In one sad case, mom went into the hospital and one of her sons seized the opportunity to go on a spending spree. His siblings spent years and thousands of dollars in legal fees to recover a portion of the money he stole. Most of it was never recovered.
There is a better strategy to allow your adult children to help you if you become ill. First, ask a lawyer to draft a good power of attorney for you. You will choose one or more people to act as your agent when you cannot act as yourself. You can give that person broad powers or limited powers, depending on your individual circumstances. Second, create a “payable on death” (POD) designation on your bank account. This allows the bank to transfer funds to your intended heirs after your death but does not give them access to the money during your life.
The best way to resist temptation is to avoid opportunity in the first place! Please contact us if we can answer questions or help you draft a power of attorney.