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Aug. 20, 2022, 12:09 p.m. EDT

Should you set up a joint account with your adult child?

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By Morey Stettner

Some retirees love to count their money. But even they may reach a point where they tire of paying bills and tracking their cash flow.

Seniors who start to worry about cognitive impairment may want to involve their adult child in helping manage their assets. If they face a prolonged hospital stay or pursue diversions in retirement (from long vacations to hobbies and volunteer work), they may fear falling behind as bills come due.

The solution is simple: They can add their adult son or daughter as a joint owner of their bank account.

Setting up a joint account is easy and free. You don’t need an attorney. By having your adult child fill out a signature card at the bank, you grant the joint owner immediate access to all the cash in your account.

Here’s the good news:  To prevent fraud, an adult child can monitor a parent’s account for unauthorized transactions. Such oversight can also give the joint owner an early indication of a parent’s eroding ability to control their spending or use prudent judgment in handling their money.

Thinking ahead, you may also see a benefit in enabling your adult child to withdraw money from your account after your death. The cash can cover funeral costs and other end-of-life expenses.

Otherwise, a protracted delay can set in as heirs wait out the probate process. Inheritance and estate settlement can take over a year.

“An adult child who’s a joint owner can walk into the bank and get immediate access to the funds,” said James Mulhern , an attorney at Mulhern & Scott in Portsmouth, N.H.

Here’s the not-so-good news:  Seniors may assume that once they name an adult child as joint owner, they can stipulate in their will how they want the funds in that account to be disbursed. But that’s not how it works. Joint accounts at death pass to the surviving joint account holder, regardless of the provisions in a will.

“Even if your will states that you want the money in your bank account to be split 50/50 between your two children after your death, the one who’s the joint owner holds all the cards,” Mulhern said. “That child may or may not fulfill your wishes.”

Speaking of siblings, beware of naming different adult children as joint owners of different accounts. Upon your death, the lack of coordination among various accounts can create confusion and potential bickering among heirs.

“It can become a sticky situation and create more problems than it solves,” said Dennis McNamara, a certified financial planner at wHealth Advisors in Red Bank, N.J.

Joint owners can withdraw funds from the account at any time for any reason. If they use the money to take a vacation or pay down their personal debt, it can stoke ire among siblings (assuming they’re even aware of it).

Another risk:  If the joint owner faces a lawsuit, divorce decree or other financial pressures, the money in that joint account is no longer secure. As bad debt mounts, a creditor can garnish the funds.

To bypass these hazards, seniors may want to consider listing their adult child as a signatory of the account rather than a joint owner. In some states, banks offer “convenience accounts” in which the primary owner can give permission for someone else to access the money. When that owner dies, the funds still go to the estate—not the other signatory.

For optimal protection of your assets, Mulhern suggests setting up a durable power of attorney and a revocable trust. That’s an especially wise strategy if you own lots of assets, including real estate, which add complexity to your estate.

“And within that revocable trust, you can name a successor trustee who can manage all assets in the trust after you die or if you become incapacitated,” he said. 

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