When a senior has a joint checking account with an adult child
Many seniors add an adult child or other trusted family member to their checking account to insure their bills can be paid in case of emergency or for the convenience of the senior. While this is a common practice, it is not, however, always a wise one.
What’s Ours is Mine
Once a person is added as a joint owner (or a “joint tenant”) to a checking or savings account, that person becomes as much an owner of the account as the original owner, even if that person never contributed a dime to the account. The joint owner can withdraw part or all the funds without even notifying – much less getting permission from – the person who’d opened the account and contributed all its funds.
Conflicts in Spending Priorities
Even if the joint tenant is well-meaning, he or she may have different spending patterns and priorities from the original owner: replacing a broken dishwasher, for example, may be considered a necessary, top-priority expense by one of the account’s owners, and a luxury that should wait till there’s an appliance sale for the other.
Death Makes Matters Worse – Sometimes Permanently
The problems with joint ownership don’t end with spending priorities: if anything, they compound when the aged parent dies. At that point, the entire balance of the jointly held account automatically shifts to the surviving member, even though the parent may have wished some or all the money to go elsewhere.
Worse, the survivor who now holds all the account funds has no legal obligation to pay the decedent’s creditors or funeral expenses. Those costs will now come out of the estate in general, effectively shifting the costs to the other heirs by shrinking the value of the estate. Although the estate may be modest, the hard feelings arising from such a situation can be immense and permanent – an outcome that would have distressed the decedent.
A Better Option
For seniors who’d like help managing their money, a better tool is a Power of Attorney – a legal document in which one person (the aging parent) grants an Agent (such as an adult child) the ability to access the parent’s financial accounts to pay the parent’s bills and managing his/her finances. Unlike a joint account holder, the Agent does not own the accounts, and the power assigned the Agent expires upon the parent’s death.
A Power of Attorney is a simple, inexpensive, yet remarkable legal tool: it can cover as many or as few areas of decision-making as the person wants to grant. The power can be as broad or as narrow as one desires. It can be set up to take care of matters, should one lose capacity and be unable to manage one’s own affairs. A Power of Attorney allows one’s agent to resolve any problems that arise with areas like Social Security, mortgage companies, the IRS, and Medicaid (a Power of Attorney is especially important, should the aging parent need to go to a nursing home).
Best of all, it is the person who creates the Power of Attorney who decides which powers should be included and who names the Agent or Agents who will be entrusted with the powers named. It’s peace of mind, and can help keep peace in the family. It’s a kind of gift you give your future self and your heirs.