Joint Tenant on Bank Accounts

I often see a senior parent put children on a bank account to allow them to write checks on his or her behalf to facilitate paying for bills. While this does make it easier for the child to pay for the parent’s bills it can also cause problems. If the goal is to make paying the parent’s bills more convenient for the child, there are ways to do it that are easier and do not place the parent’s funds at risk.

Here are two compelling reasons not to put a child on a parent’s bank account.

1) Even though the child and parent may know the money is the parent’s, the rest of the world, including creditors, estranged spouses and financial institutions, consider the money to also be the child’s as well. For example, if a child has judgments against them, then creditors can attach it to the joint bank account and levy funds to satisfy the judgment.

2) Also, when applying for Medicaid, the State will want to see proof that the child’s money is not intermingled and sometimes request their personal statements to ensure that there isn’t money being put aside that they are not made aware of which complicates and prolongs the Medicaid process more.

3) If the account is titled jointly, then upon the parent’s passing, the account will pass outside of probate and go directly to the child whose name is also on the account. Even if the parent’s will states that he wants the assets to be split among all his children, the title of the account controls and the one child whose name is on the account will own the account.

There are two simple solutions to allow a child to write checks from a parents account:

1) The parent executing a durable power of attorney naming the child as agent, also known as the attorney-in-fact.

2) The parent executing a document with the bank giving the child signing authority.
Both of these solutions allow the child the power to write checks, pay bills, and access the parent’s account without any of the risks associated with having the child on the account jointly.

Please contact us with any questions or concerns your family might be having. Plan before the crisis!