Should I title my financial accounts jointly with my child? by Dan Leininger

Many seniors title their financial accounts jointly with their children.  However, extreme caution and careful consideration should be exercised before doing this.  First, ask yourself what is the reason for doing this?  Many seniors want a child as joint on their financial accounts so that the child can help with the parent’s financial management.  As a joint owner, the child can withdraw money from the account for paying the parent’s bills or make deposits to the account.  We call this a “convenience account.”  In other words, the reason why the child is made a joint owner is not because the parent wants to give the money in the account to the child, but the child is placed on the account for the convenience of helping the parent with managing their money and paying their bills.  The problem is that when a parent titles any account jointly with a child, the parent is making the child a co-owner of the account and exposing the account to the creditors of that child and possibly to that child’s divorcing spouse.  Another problem is that upon the death of the parent, the child automatically becomes the owner of the account.  If the parent had wanted the money in the account to be divided among a number of persons, this may not happen if the child becomes the sole owner.

If the goal is to assist the parent with financial management, then I strongly recommend that the parent execute a financial power of attorney and appoint the child as attorney-in-fact and confer upon the children the power to handle banking and other financial matters.  When acting as attorney-in-fact, the child is only acting as an agent for the parent and has no ownership in the account, and there is no exposure to the child’s creditors.  The parent retains sole ownership of the account, and upon the death of the parent, the account will be divided as provided in the parent’s estate plan.  This is not to say there it is never appropriate to make a child a joint owner of an account with a parent.  However, stop and think before doing so.