As people age, they often rely on their children to help them with many different aspects of their lives. This can include trips to the doctor, grocery shopping, paying bills, etc. When you need a child (or anyone else) to help with your finances, it may seem easy to simply “add” that child to your bank account so he or she can pay your bills. When you “add” a person to your account, the bank will normally make that person a joint owner of your account, and will often structure the account so that it has a “right of survivorship,” meaning the surviving joint owner will be the sole owner of the account after the death of a joint owner. This strategy oftentimes has unintended consequences that can easily be avoided.
When you add a child as a joint owner to your bank account, you are potentially exposing the assets in your account to the creditors of that joint owner. This means that should your child ever be involved in a lawsuit, the money in your bank account may be at risk.
Adding a child as a joint owner may also cause you to “accidentally disinherit” other beneficiaries. For example, if your estate plan provides that your son and daughter will inherit your estate in equal shares, but your son is a joint owner on your bank account and that account has a right of survivorship, your son will own the entire bank account at your death. Your son will have no legal obligation to give half of the money in the bank account to your daughter, even though it may have been your intent for your children to share equally in the account.
Luckily, there is a way to have a child help you with your finances without making them a joint owner of your accounts. By executing a durable general power of attorney, you can appoint someone to act as your “financial agent” without making that person an owner of your account, thus avoiding the unintended consequences that may come with joint ownership.