In this episode, Tim breaks down the reasons why putting your child of any age on your bank account is not a good idea.
Podcast Transcription:
WRVO Producer Mark Lavonier:
This podcast is part of the series Estate Planning Pro Tips, hosted by attorney Tim Crisafulli of Crisafulli Estate Planning and Elder Law, P.C. An estate planning, probate, and elder law firm serving clients throughout Central New York. A former school teacher, Tim explains complex legal subjects in an easy-to-understand way. The commentaries focus on essential aspects of estate planning, such as wills, trusts, asset protection, long-term care, and probate. And now here's Tim.
Tim Crisafulli:
Quite often, people will put their adult child on their bank account. They do this for different reasons. Sometimes it is done so that the adult child can handle banking transactions for a parent who does not want to leave the house. Other times, a person may want the adult child to have instant access to funds in the event the person passes away, whether for funeral expenses or other immediate needs. Sometimes a person will just make one child a joint owner of a bank account or other asset, thinking, "My son is a good boy. He'll know what to do. He'll share it with his siblings. This is easier than a more formal estate plan."
Bad idea. Let's break down why. First, putting someone on a bank account can mean different things. Sometimes it means that another person has check-cashing or check-writing privileges, but nothing more. Sometimes it means the other person is a true joint owner. This can be disastrous. If you add an adult child to an account as a joint owner and then that adult child gets sued, gets divorced, has health issues not covered by insurance, has creditors, or otherwise falls upon hard circumstances, then it will likely become necessary to defend that account from being used to satisfy the child's legal obligations. What a mess.
Lastly, it's just a bad idea to make one child joint owner of all assets and then hope that the child will do the right thing after you pass. Granted, I am sure your child is an angel and probably would. But don't forget that life can get in the way. And even if your child would share with siblings, your child might not be able to. For example, if you leave everything to one child and then that child dies before making the distribution to siblings, or if that child becomes disabled, or if that child gets divorced, or if that child is sued, or if that child encounters any other major life challenge, then that child, no matter how well-intended, might not be able to share with siblings. Moreover, such gifting could have negative tax impacts or even be completely impossible if that child needs long-term care.
The goals are sound: authorizing an adult child to help with financial transactions and getting assets to loved ones in an efficient way. Quite often though, simply putting a child on a bank account or other asset is the wrong choice.
