Sometimes convenience can be costly. For an adult child assisting an aging or ill parent, having a joint bank account can seem like a good idea.
But is it?
For sure, there are advantages. “You can help your parent handle their finances, monitor bank fees and fraudulent activity on the account, pay their bills if they become ill and access their money if they should pass away,” points out Joshua Zimmelman, president of Westwood Tax & Consulting in Rockville Centre.
But as with most financial matters, there are key considerations. “The account is subject to claims by creditors of all account owners," explains Robert Kleinman, a certified financial planner with Kleinman Financial Services in Port Washington. "If the adult child" — or the parent — "has a big legal settlement against them or files for bankruptcy, creditors can collect from the joint account,” explains Robert Kleinman, a certified financial planner with Kleinman Financial Services in Port Washington.
Also, when the parent dies, the adult child on the joint account will get full control of the money. “Are the other siblings OK with or even aware of this? Is this what mom and dad wanted? Is anyone else minding the books? There’s too much potential for abuse,” says Bob Karn, a certified financial planner in Farmington, Connecticut.
If there's a joint account, the money could disappear or be misappropriated when the parent dies before the parent’s will is read and executed, points out Byron Tully, author of "The Old Money Book."
What to do instead
If you have power of attorney, children can make financial decisions for their parents and the parents remain the owners of the account, says Zimmelman. Additionally, have parents add a “Payable on Death” provision to their account, so the money will go directly to their child instead of getting tied up in probate.