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Should an Adult Child Caregiver Be Made a Joint Account Signer on a Bank Account?

Weber Law Dec. 1, 2015

Many estate planning strategies require sophisticated planning and skilled drafting of relevant documents.  However, there are some estate planning tools that are so basic that people use them with almost no prior consideration of their relative advantages and disadvantages.  Certain assets like retirement plans, bank accounts, and life insurance policies can be passed to a loved one outside of probate by designating a beneficiary.  Many websites recommend adding an adult child who is functioning as a caregiver for an elderly parent as a joint account holder or beneficiary as a low cost and efficient estate planning strategy.

This can be an especially convenient way to provide access to an elderly parent’s bank account to facilitate purchases and payment of bills.  However, there are potential problems that can arise if the advantages and disadvantages are not evaluated prior to adding an adult child to your bank account.  Although use of joint account holder status provides a convenient and easy method of granting access to funds by a caregiver to provide for the needs of a parent, there are drawbacks to this approach.

Creditor Access to Bank Account Funds: If the adult child who is serving as a caregiver owes business debts, alimony obligations, or other debts, funds in the bank account constitute an asset potentially available to the adult child’s creditors.  Even if a caregiver is only added to the account for convenience without the intent to grant co-ownership during the life of the primary account holder, joint signing status makes the adult child a joint owner of the funds.  Creditors of a caregiver might levy against the bank account despite the fact there was no intent to transfer any portion of the money in the account to the adult child.  If funds vital for the care and support of a retiree are maintained within the account, the sudden depletion of funds to satisfy unpaid tax obligations, child support payments, or other debts can have a devastating financial impact.

Potential Liability for Judgments: If the adult child who is taking care of an elderly parent is involved in a car accident, the funds in the jointly held bank account are susceptible to judgement creditors to satisfy a personal injury settlement or judgment.  Judgment creditors, such as plaintiffs in personal injury lawsuits can enforce their debt against a bank account that is owned jointly by the defendant and one or more joint owners.

Unrestricted Access to the Account: Although the sole purpose of adding an adult child to an account might be to facilitate access to cover bills and pay for monthly expenses of an aging parent, the joint signer will have unfettered access to the funds.  This unrestricted access means that the child acting as a caregiver has the ability to deplete the account without the knowledge or consent of the parent.  The caregiver has the power to liquidate the account and leave the elderly parent destitute.

The risks posed by these potential issues must be weighed against the convenience of a joint account.    There are few easier methods to allow an adult child taking care of an elderly parent to write checks, deposit funds, and pay bills than to include the caregiver as a joint account holder.  However, joint access to a bank account might be provided through a number of alternatives that avoid the drawback discussed above.  A revocable living trust or power of attorney can grant access to the funds in a joint account without the disadvantages of joint ownership.  These estate planning tools mitigate the risk of making the funds vulnerable to creditors because an agent under a power of attorney or a trustee under a living trust does not have an ownership interest in the funds.  Further, the trustee or attorney-in-fact is subject to fiduciary obligations, which reduces the risk of misappropriation of the aging parent’s funds.

If you have estate planning questions, we welcome the opportunity to talk to our seasoned Kansas Estate Planning Lawyer who will answer all of your questions.  We invite you to call the Weber Law Office or to submit an inquiry form through this website to schedule your initial consultation.