My elderly mother needs help managing her finances. Should I just have her add me to her bank accounts?

Joint Bank AccountsThis can be a very difficult and sensitive situation and I understand the impulse to deal with it as quickly and easily as possible. However, I am always surprised by how often folks in this situation come to the conclusion that the thing to do is just have mom (or dad) “add” an adult child to the account. This course of action carries with it significant, often unintended, consequences. There are a number of issues to consider before mom actually adds anyone onto any of her bank accounts. And it is important to realize that it is not as simple as just adding a name to the accounts.

First, it is important to understand that there are a number of ways an adult child can be “added” to a parent’s bank account, and each will yield significantly different results. Based on what I see when talking with clients, most frequently when a person goes to the bank with the intention of adding an adult child to an account to help manage the finances, the bank adds the child as a joint owner. Adding a joint owner means that mom and adult child now own the account together. Essentially, mom has made a gift of one half of the account to the child, even if the child has no intention of using the funds for his or her personal benefit. Such a change on the title of an account is considered a gift by the IRS and depending on a number of factors, could have tax consequences. An additional consequence to be aware of is that a jointly-owned account is subject to the current and future creditors of each owner. Meaning, if the adult child that is added on to mom or dad’s account and is in a car accident, divorce, or bankruptcy, such account is now subject to the adult child’s creditors. Further, it is critical to understand that when one joint-owner dies, the surviving owner becomes the sole owner, regardless of what mom’s Will might say. This could lead to unintended affects and possibly even result in an expensive Estate Litigation case.

The concerns noted above are just some of the issues that must be considered before title is changed on a bank account. There are additional methods of “adding” an adult child to an account that will enable a child to assist an elderly parent, for example, as agent under power of attorney or simply as an authorized signer. In choosing what is right for mom or dad’s situation, it is critical to understand exactly what mom’s goals are and for them to discuss with an estate planning attorney well versed in this area to make sure that their goals are given proper effect.

Written by Scottsdale Estate Litigation Attorney Samantha Garber

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