Don't Add Kids to Bank Accounts

Often, I hear clients mention that they added their child as a joint owner to a bank account. This is usually done so they can help pay bills, or to make sure that a family member has immediate access to accounts upon death. Although the intent is good, it usually causes problems: first, when you add somebody as a joint owner, the account automatically becomes theirs when you pass. This bypasses any estate plan you have created and the protections that come with that plan. Second, if you make a joint owner on your account with the intent that they will share the proceeds, you might be shocked to learn the sharing does not always happen (read this: sometimes people fight) and if they do share it can trigger some strange IRS (Internal Revenue Service) gifting rules. Third, that person you add as a joint account holder will also be exposing your accounts to any claims or liabilities they might have.

There are tools you can use to have the same conveniences without unintended consequences. Three primary tools: first, you can add somebody as a “signer” on your account; this would allow them to pay expenses on your behalf without being an owner. Second, you could change or create an account in the name of your trust. In some circumstances, you may also want to add a child as a Co-Trustee so that they could have immediate access to funds if needed. Third, make somebody your power of attorney – all the same rights but just a little more paperwork. If you have questions or need guidance on how best to approach providing access to accounts, please contact our office.