Legal experts caution that adding a child to your bank account for efficient access to funds upon your death can create its own complications. Additionally, doing so is not nearly the same as formalizing your intentions in a will.
Joint Bank Accounts Sound Nice
At first glance, ensuring that an adult child can easily access your funds to help care for you in older age and manage your affairs upon death, seems like a nice, efficient solution. Just go to the bank, arrange for a joint account, and many problems solved, right?
Not so fast, say legal experts. As Lisa Paine of Jaburg Wilk points out:
Most bank accounts are set up so that once a child is added as a co-owner to a parent’s bank account, the child becomes a legal owner of the assets in the account. Even though in the minds of both the parent and the child, the money “belongs” to mom or dad, the reality is that from a legal perspective, the money actually belongs to both the child and the parent. This means that the money in that account can be spent by the child for any reason, not just for caring for mom or dad. The money in the account also becomes reachable by any creditors of the child. Even if the child is a responsible adult, unforeseen circumstances, such as a car accident, could cause mom or dad’s bank account to be wiped out due to the child’s liabilities. One of the most common creditors is a divorcing spouse, and the money in the joint account could be counted as an asset of the child in a divorce.
In addition to these complications and risks, it’s also important to understand the value of laying out your intentions in a will. Think about it: with a bank account, 100% of the money will transfer to the child signed on as a co-owner of a joint account. What if life gets complicated and siblings and other relations don’t understand your wishes as well as you had hoped? What if the child with the bank account access is left with a lot of conflicts and churning affairs to resolve without the roadmap of an estate plan, including a will, to follow?
Estate Planning Tip: Fiduciary Bonds
Fiduciary bonds, sometimes referred to as executor, estate, bonds, play an important role in ensuring assets are managed according to the intentions of the deceased and the law. Legal Match explains:
When a person dies or is disabled, often there is a legal document or will that details what is to be done with the deceased’s estate. When this happens, either the document or the court will appoint someone called the executor to distribute the assets of the estate according to the written wishes of the deceased. An estate bond is a safeguard to ensure that the executor faithfully complies with the written wishes of the deceased.
The estate bond acts like an insurance policy….Some states require the executor of an estate to post an estate bond when the estate holder dies, as part of the distribution process.
Colonial Surety Company makes it quick and easy to obtain all types of fiduciary bonds, including estate and executor bonds. Just get a quote online, fill out the information, and enter a payment method. Print or e-file the bond from anywhere. With Colonial, securing instant digital fiduciary bonds, is that simple.
Good To Know: Still Pondering The Bank Account?
Alternatives to making an adult child a joint owner on a bank account include:
- Filling out a form at the bank making an adult child an “agent” or “signer” and providing access to money only if needed to help mom or dad. In this way, the funds do not legally belong to the child—or creditors of the child.
- Completing a “beneficiary designation form” at the bank, directing the passage of funds to children upon the death of mom or dad.
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Founded in 1930, Colonial Surety Company is a direct writer of surety bonds and insurance products. Colonial is rated “A Excellent” by A.M. Best Company, U.S. Treasury listed, and licensed for business everywhere in the USA.