Is Bank Account Sharing a Good Idea for Seniors?
Questions to Ask
I often hear someone say that their senior parent has added them as joint owner of an account. This is done with the best intentions, often so that the son or daughter can pay bills for the parent or at least keep an eye on things. Whether you have taken this step already or not, there are some questions you should ask to be sure the decision is a sound one.
Sharing is not the only way to care.
- The joint owner has full rights over the account. They can spend the money any way they want at any time. Do you trust them to not take money for themselves, even when you are no longer able to pay attention?
- Are there any siblings and would you want them to inherit their share of any joint account? Normally, the joint owner inherits the full balance on the death of the other owner.
- Are grandchildren applying for college financial aid? The money in any joint account will count in full as assets of the parent, and may limit aid.
- Are you prepared to be open to the financial risk of the other person? If you both own an account, it doesn’t matter whose money went in. It becomes the other person’s asset as well and can be subject to overdraft charges, liens, divorce proceeds, and debt collection.
Other Options:
Before taking the joint ownership route, explore some other ways to achieve the same result.
- Power of Attorney. A power of attorney document is simple to have drawn up and everyone over the age of 18 should have one in the case of sudden incapacity. The agent designated has a legal responsibility to act in the best interests of the principal (creator). Some institutions have their own POA documents to use.
- Authorized User. At many banks, you can add someone as an authorized user to your account(s). This is often enough access to accomplish the goals you have. Make sure you know the limitations of this status, however.
Generally, a power of attorney is the recommended route to take. The person granting authority must be in good mental health or guardianship may be required. I would advise you to speak with an attorney if you have further questions.
As a Daily Money Manager, I am insured for and willing to act as power of attorney for clients who have no one to do this very important job. It is not a responsibility I take lightly.