The Trouble with Joint Accounts

The Trouble with Joint Accounts

From GRC’s Fall 2018 Newsletter

Adult children commonly help their parents with bills, and are often added on financial accounts as joint owners to enable this help. While this may seem like a good idea, it is fraught with problems. Naming another person as a joint owner makes them an owner of the funds, and this triggers potentially problematic issues during life and after death.

During life, assets in joint accounts could be at significant risk if a child is an owner of the account. Your child could abscond with the money, his creditors could reach or attach the account, and a divorce court could divide the joint account as part of his “marital property.” In all these circumstances, the money you were relying on to maintain your standard of living could be gone. Holding joint accounts with a child could also cause issues after death. If only one child is on your account, this may lead to litigation among your children over ownership of the account.

There is a presumption that placing another on an account is an intended gift of that account to the new joint owner. But this can be rebutted by showing the joint owner was added only for convenience. This can lead to costly and divisive fights over your intention. And the perceived benefit of avoiding probate with joint accounts may not be the case if the account is deemed for convenience only.

If you need assistance with your finances from your children, it is better to use a durable power of attorney so that your child may access the funds and write checks (but only for your benefit). You could also fund a revocable trust and name the child as a co-Trustee. These easy steps can help avoid the pitfalls noted above.