By: Gail L. Abrams, Attorney At Law
Many seniors unfortunately add an adult child to their bank account for ease and convenience so the children can help with money management and payment of bills. However, while joint accounts can be convenient, they can pose serious consequences in some families. Discussed below are some reasons why an adult child should not be on an account with their parent.
Money that is held in a joint account belongs to both account holders equally. The account holders can withdraw all or some, spend, or transfer money in the account without the consent of the other person on the account.
Read, ‘Protecting Your Assets For Generations,” here: https://theconnectionsnj.com/protecting-your-assets-for-generations/
What about your Will and the way you want assets to be distributed when you pass away? When one account holder dies, the money in a jointly owned account automatically belongs to the other account holder without passing through your Will or Trust. In my practice, many children will keep the money in this account for themselves and not share it with the rest of the heirs. The unintended effect of joint ownership is that the parent could be disinheriting his or her other children from this asset if they are not also named on the bank account as owners.
Additionally, not all children have their parents’ best interest at heart. Quite often children will remove assets from the account and not tell the parent. There is nothing to prevent that child from removing the entire balance of the account.
What about your daughter-in-law or son-in-law? They could have undue influence on your child. If your child gets a divorce, 50% of your shared bank account may be considered a marital asset and be shared with the ex-son-in-law or ex-daughter-in-law.
Additionally, if your child becomes disabled or needs assistance, the joint account may make your child ineligible for benefits because this account will show up as an asset.
Quite often in our practice, we will get a question as to whether a parent should add their child to the title on their homes. This presents negative tax consequences should you sell the house or pass away. Families do not realize they have created a tax burden where if they had just gotten a legal consultation, they would have avoided a tax nightmare.
What are some simple solutions? 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. In addition to creating a Power of Attorney for Assets, everyone should also have a Living Will, a Power of Attorney for Health Care to protect them and their assets should they become ill and unable to care for themselves or their property. Everyone should also have a Last Will and Testament or a Living Trust based estate plan, depending upon their needs. This is a complex area of law and these documents should only be prepared by a qualified estate-planning attorney. Gail L. Abrams has been in practice for 25 years and specializes in Estate Planning. The Law Office of Gail L. Abrams offers free workshops on these topics. Please visit Gail Abrams web site at www.estateattorneynj.com for dates and locations. Reservations are required! Reservation line is (908) 753-4156.
Here is a list of upcoming workshops that the Law Office of Gail L. Abrams offers:
Estate Planning Workshops in September and October
Tuesday, September 17th and Tuesday, October 22nd at the Grillestone
2377 Route 22 West, Scotch Plains New Jersey 07076: 11:00am Prompt! Lunch Will Be Served!
And Thursday, September 19th and Tuesday, October 24th at the Chimney Rock Inn
342 Valley Road: Gillette, New Jersey 07933: 11:00am Prompt!
Lunch Will Be Served!