What is the risk of adding my child to my bank account?

Michele Ungvarsky of Estrada Law is an estate planning attorney. She can be reached at 556-2462.
Michele Ungvarsky of Estrada Law is an estate planning attorney. She can be reached at 556-2462.
When working with families dealing with estate planning on a loved one’s estate, estate planning attorneys often find themselves answering a variety of questions about how to avoid estate planning and probate in the future. There are a whole lot of tools at the disposal of an estate planning attorney when it comes to protecting an estate and avoiding probate, and each has its pros and cons.

One method I frequently see older individuals consider to keep some assets out of estate planning and probate is to have their adult children added as “joint owners” of their bank accounts. Essentially, this means that the account, and its contents, becomes the property of not only the parent but also anyone else named as a joint owner. The intention is that once the parent passes away, the child(ren) can immediately access the money without it ever having to go through probate.

If you are lucky, this approach can work to pass on assets. However, I have had to deal with several cases where adding others to your accounts can lead to big problems. These do not affect every individual, so you will want to discuss it thoroughly with an estate planning attorney. Here are some potential pitfalls that you should carefully consider.

For one thing, every joint owner will have full access to the account. Even while the parent is alive, the adult child(ren) could choose to spend however he or she wishes with no legal repercussions. After all, they are going to get the money when you die, right? Sadly, many parents have lost their entire income or savings when their children have taken advantage of the situation. To take it a step further, unless you name every single child/heir as a joint owner on the account, the person who is named could theoretically keep all of the money without splitting it with siblings or others. It happens.

Another very real concern is that both the parent and the child could also suffer should one of them be in debt. Creditors could demand money from anyone with their name on the account, regardless of who put the money in there. So, if after the parent’s Social Security check is deposited, a child (who was a joint owner of the account) owes back taxes, it is possible that the Social Security money could be seized to pay the debt. The same holds true if the child goes through a divorce or bankruptcy. Not exactly the plan you had in mind is it? Remember, bad things happen to very good people.

A much better option is to talk with your bank or credit union and have a Pay on Death beneficiary placed on your account. Again, a word of caution, if you want more than one person to receive the money after your death, list everybody. A Power of Attorney drafted by an estate planning attorney will allow your “agent” to access the money for your benefit should you become incompetent or incapacitated. A Power of Attorney can also name a “monitor” or a person selected by you to “look over the shoulder” of your agent and make sure the money is used only for your

These are a few of the matters to take into consideration when “Planning it Forward.” It is up to you and a good estate planning attorney to determine what will work best for your particular circumstance and situation.

Estate Planning and Elder Law Attorney Michele Ungvarsky is with Estrada Law, P.C. in Las Cruces. She provides Medicaid counseling and estate planning. She is licensed in New Mexico and Texas. To help people understand the value of planning, Ungvarsky presents free educational workshops on a regular basis. To reserve seats at a workshop, contact Estrada Law at PlanItForward.com or call 556-2462.