What Is Wrong With a Joint Bank Account With Your Child?

Many seniors set up a joint bank account with a child for the sake of convenience. “So someone can pay bills if something happens to me.” This is a reasonable and practical goal but it can be accomplished in a much better way and avoid the harmful potential consequences.

With a joint bank account when someone dies (typically the parent) the other joint owner (typically the child) becomes the sole owner of the account. That is the deceased owner’s Will or Trust does not control ownership of a joint bank account. This means that if there is a dollar in the account or one million dollars in the account the other joint owner becomes the sole owner and has no legal obligation to share the account with anyone else. This can cause unintended problems when a parent has more than one child and the child who becomes the account owner decides not to share the account assets with their siblings.

With a joint bank account if your child has credit problems, judgments, or is going through a divorce then the funds in the joint account may be in jeopardy. Another problem with a joint bank account is that the other joint owner can remove all the funds and there is nothing you can do about it.

To avoid these problems but still allow for bill payment and asset management if you are disabled the better alternative is to have a financial Durable Power of Attorney. This will allow for bill payment and general banking transactions to be conducted by your child or other person of your own choosing. This person is not an owner on the account and their problems do not become your problems.

Another alternative to the joint bank account is to have the account made part of a Revocable Living Trust. This will allow for bill payment and general banking if you become disabled and unable to manage your affairs. The Trust will also ensure that after you die the account assets are given to all persons that you select and not be limited to one person as with a joint account.