14 Sep Helping parents with joint bank accounts
Q. I want to open a bank account with my mother so I can help make sure her bills are paid. Should we be on the same account or are there possible problems I’m not thinking of? Instead of could get online access to her account I guess, but what I could do then would be limited, right?
— Trying to help
A. It’s great that you want to help your mom, but you’re correct to be cautious.
It is common for a parent to add a child as an account holder for a bank account so that they can help manage the account, said Howard Hook, a certified financial planner and certified public accountant with EKS Associates in Princeton.
“What people do not realize is that by adding their child to the account they are in essence making a gift of half of the account to that child,” Hook said.
Besides possibly creating gift tax issues, Hook said, this also directs that the account upon the parent’s death go to the child whose name was put on the account.
“This may or may not be what was intended,” Hook said. “For families with more than one sibling this may cause problems if the intent was to split the assets evenly amongst the children.”
Another possible issue could be if you have creditors. They could then go after the money in the joint account, even if you didn’t add one penny.
Hook said the better way to handle this would be for the parent to sign a power of attorney (POA) that gives the child the power to act as their agent.
The POA should be drawn up by an attorney familiar with these documents such as an estate or elder care attorney.
“Best practice would indicate giving the bank the POA immediately if it was the parent’s intent for the power to be effective immediately, even if the parent was capable of managing most of their affairs currently,” Hook said.
Also be sure to read this story about what you can do if a bank doesn’t want to accept such documents.
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This post was first published in September 2016.NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.