As seniors age, many seniors believe that they should add an adult child to their bank account.  Purely for ease and convenience, a jointly owned bank account would be a good way for an adult child to monitor a senior’s susceptibility to fraud or scams or to assist a senior with money management.  However, while joint accounts can be convenient, they pose dire consequences in some circumstances.  

Generally, money that is held in a joint account belongs to both account holders equally.  Banks are not required to confer with all owners on an account if one owner seeks to withdraw any or all of the account. The account holders can withdraw, spend, or transfer money in the account without the consent of the other person on the account.

Before putting anyone on a joint account with you, consider the top five reasons elder law attorneys advise against sharing a joint bank account with an adult child or any other adult who is not a spouse.

• Unintentional Disinheritance: When one account holder dies, the money in a jointly owned account automatically belongs to the other account holder without passing through probate.  There is no legal obligation for that surviving joint account holder to share the account with anyone else.  This could be troublesome if a parent added one child’s name to the account and mistakenly believed that the account would be transferred equally to all of the surviving children in the family through a Will on the parent’s death.  The unintended effect of joint ownership is that the parent could be disinheriting his or her other children if they are not also named on the bank account as owners.

• Risk of Intentional Loss:  Once an adult child is added to a parent’s bank account, there is nothing to prevent that child from removing the entire balance of the account.  For some adults, the risk of temptation is too great.  Money can make sensible people do strange things.

• Risk of Unintentional Loss: Adding a child to a bank account can expose your bank account to that child’s creditors. Potentially, if your child caused a car accident that injured others, that jointly owned bank account could be lost to those creditors in a law suit.

• Risk of Meddling “Outlaws”: Do you like your child’s spouse? Do you trust your child’s spouse?  If you answer “no” to either of these questions, but you share a bank account with that child, you are taking a risk that the spouse of your child could access that joint bank account that you share with your child.  In one example, if your child has a Durable Power of Attorney in place that names their spouse to act for them, potentially that the spouse can act for your child through that valid legal document and access or use those funds.  In a different example, those same funds in that joint bank account could also be at risk of becoming the spouse’s if your child and the spouse eventually divorce.

• Unexpected Risk: What if your child became disabled in a car accident and wanted to seek public benefits to cover the costs of care?  That money in your shared joint account is susceptible to having to be spent down for your child to eventually qualify for those needs-based benefits.  Your child would not be able to remove his or her name from the bank account because most programs for public benefits would consider this transaction an uncompensated gift or transfer to the parent that would otherwise create a period of ineligibility for the child to receive any benefits.

Joint accounts can work well in two situations. (1) when a senior has just one child and wants everything to go to him or her; and (2) when the funds in an account are minimal and intended for access to funds in the event of incapacity or death.  In these two situations, jointly owned accounts still share some of the same risks described above, but for many seniors, the risks are outweighed by the convenience of joint accounts.

Nevertheless, there are much more effective estate planning tools that can help you avoid or limit your risks. A Durable Power of Attorney can provide the same kind of access to a bank account with significantly greater, more powerful protections in place for a parent than a shared bank account would offer. A Revocable Living Trust with provisions for your disability could also protect an aging parent.  Reach out to an experienced elder law attorney to learn how to protect yourself and your assets from unintentional risks.