The Truth About Adding Your Kids to Your Bank Account
Many parents think that “adding their children’s names to their bank account” is an easy way to be sure their kids can help if something unexpected happens, but it can cause some unintended consequences. Legally, what you are doing is naming a child as a joint owner of the account. This can have big legal implications that you might not intend. Despite friends or bankers telling you it’s a good idea, this sort of “coffee shop” legal advice can cause big problems down the road.
While naming your child(ren) as joint owner of your bank account could insure that bills and other obligations can be taken care of without you, it is best to understand what other problems you may be creating for yourself and your child by adding them to your bank account.
5 Risks of Simply Adding Your Child’s Name to Your Bank Account
There are many potential issues that could come up later if you add your child to your bank account now. Here are just a few to think about:
- If you die, the child on the account gets all the money in the account. This can be a real problem if there are several children in your family, but you only named one of them on the account. Even if you intended for all the children to share the money upon your death, legally the money belongs to the child whose name is on the account.
- If the child on your account gets sued or divorced, YOUR money in your bank account could be at risk.
- If your child becomes disabled (through a car accident or a stroke) after you are already disabled, then their spouse will gain control of the account and your money.
- If creditors come after your child, they could come after YOUR money in the “joint account.”
- If your child is on the account as a joint owner, then they have every legal right to come and take ALL the money from the account anytime they want. And there is not much you could do legally to stop them from doing so. You’re probably thinking, “My child would NEVER do that.” But money makes people do strange things. We see it nearly everyday.
2 Solutions That Can Prevent Future Problems
1. Power of Attorney
If you want a child to be able to pay your bills if you are sick, then name them a Power of Attorney instead of adding them as a joint owner of your bank account.
2. Payable Upon Death
If you want your money to go to your child or children at death, use a payable on death designation or give instructions in your will or trust.
Experienced Estate Planning and Elder Law Attorneys Can Help
Ultimately, you need to find solutions to accomplish your goals without creating unintended problems down the line. This is why it’s important to have the help and advice of an experienced estate planning and elder law attorney. Attorneys use legal tools like Powers of Attorney, trusts, wills and payable upon death designations to make sure things will go smoothly upon death or disability.
The most effective attorneys can help you solve problems without causing extra stress and unwittingly creating more problems down the road. Experienced estate planning and elder law attorneys should be able to anticipate the potential problems that your current actions may cause and prevent them through the use of legal solutions.
To continue learning more on the topic, download our free report, 12 Reasons Not to Give Your Property or Your Money to Your Kids Right Now. We also offer free monthly workshops for the community — Wills & Trusts: How to Get Started and How to Protect Your House and Life Savings from the Nursing Home. You can find upcoming dates for those workshops here or give us a call at 217-726-9200 to save yourself a spot.