Ownership of Financial Accounts

“Vice presidents” at bank branches often advise including adult children of seniors as joint tenants (co-owners) on the parents’ bank accounts. This is probably done “as a convenience” to allow the children to pay bills out of the account and possibly to avoid probate by having a surviving owner when the parent passes away. Apparently, the bank reps do not realize what unfortunate issues this practice can cause.

When adult children are added as co-owners on a bank account, that can expose the account to the children’s creditors if there is legal action such as a divorce property settlement or other lawsuit. Parents may find themselves having to defend their property interests in their own accounts. Also, of course, the children are able to access account funds for their own purposes.

When the parent passes away leaving one or more children as surviving co-owners, those children have no legal obligation to use the funds to pay the parent’s final expenses or to respect the parent’s estate plan as established in a Will or Living Trust. Also, and this is important: a surviving joint tenant has no legally enforceable duty to share such funds with other people, no matter what was verbally agreed to.

When bank accounts pass to surviving co-owners, the deceased parent‚’s Will or Trust does not control who receives such bank account funds at the parent’s death. In other words, adding adult children as joint tenants on a bank account can defeat the parent’s established estate plan.

What can be done to enable the adult child to access a parent’s bank account for the benefit of the parent while the parent is living? Simply use a financial power of attorney. Most banks recognize the “general” financial POAs an attorney can provide. For those banks that do not, the bank will usually have a “special” financial POA available, with which the parent as principal can designate an agent with power only as to the parent’s accounts at that bank. And remember, financial POAs of both types become void when the principal dies.

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