Should I put my children on my bank accounts?

People are all the time telling me, “I put my son's name, on my account, so that he can get to my money to pay for my funeral. Most folks create joint accounts or joint ownerships as a do-it-yourself way to plan for disability or death.  However, hearing the phrase “I put somebody's name on  . . .” makes Oregon elder law lawyers cringe. Let me explain why.

Assume I have a checking account with $50,000 in it, and I decide to put my son's name on it. To me it is a convenience in case I can't pay my bills and he needs to do it for me. To the bank, however, is is gift of an undivided interest in the account. As far as the bank is concerned, my son owns that money as much as I do. He can take any amount of money out of the account for any reason he wants, because he owns it too. I may intend that he use the money to pay my funeral expenses and doctor bills after I die. He doesn't have to, however, because when I die, he owns it all and can do what he wants with it. I may expect him to divide what isn't needed for bills with my daughter. He might do that. Or he might not, and making him do it will require more legal fees than I want to pay.

In addition, once I have put his name on the account, the money becomes a target for people who are trying to get money from my son. If he gets sued, or goes bankrupt, or gets in trouble with the law and has to pay restitution, folks may come around looking for the money in that account to pay his debts.

Now let's say I die. All my money is in the account with my son's name on it. My will says that I want my house sold and the money divided between my son and daughter. Before that happens, though, my bills have to be paid, my funeral has to be covered, and all the expenses of preparing the house for sale have to be paid by somebody. Unfortunately, the money in my account all went to my son because it was jointly owned by the two of us. He doesn't have to pay my bills, pay the expenses related to the property, or split the money with my daughter. He might do that, but he doesn't have to. If he refuses to contribute, he leaves my estate cash poor and unable to pay expenses until the house is sold. This will force a premature sale and a poor selling price.

A parent is often concerned that upon his or her death, the children will be unable to access accounts quickly enough to pay bills. That is seldom the case. If there is a will, a personal representative can be appointed in plenty of time to take care of expenses. If there is a trust, the successor trustee can take control in a timely manner.

The bigger concern is having a child able to access funds in case the parent is disabled. This is a more serious concern. Conservatorships are cumbersome and expensive. Powers of attorney are unreliable. I have seen joint accounts that have allowed Social Security to be automatically deposited and transferred to care givers years after the elder has lost capacity to handle money. In those cases joint accounts worked beautifully. Beyond that they make me very nervous.

I am comfortable with my elderly clients having a small operating account on which a child is authorized to write checks. The account should normally have under $10,000 and not be the only source of cash for the elder. Other than that, I want to leave the accounts in the name of the elder and use a well-written power of attorney to cover disability issues. If the elder has a lot of money, the protection offered by a conservatorship is worth the expense and paperwork. 

Joint accounts should play a very limited role in the estate plan of an unmarried elder. Consider carefully the dangers and weigh them against the advantages. The best way to do this is to make the conversation about joint accounts not one that you have with your children, but one you have with your estate planning lawyer.

When to file a guardianship or conservatorhsip?

I have clients show up at my office saying that the folks at the care center or some service provider says their elder family member needs a guardian or conservator. They have come to me to start that process. My response is to ask what task are they trying to accomplish that cannot be done without the court order appointing a guardian. Who is standing in your way and saying you can't do what you want to do without court authority?

The fact is that a lot of elder care is done with a wink and a nod. People who are disabled with dementia enter contracts for long term care and live for long periods of time in care centers. Children take over the finances for their disabled parents using joint accounts or a power of attorney. Problems do occur—such as when the children clean out mom's account to buy drugs—but most of parent-child financial arrangements work out just fine.

(Elder financial abuse is real. Those who commit it need to be chased down and walloped many times with axe handles, but most children do not steal from their parents.)

I don't advise having a court appoint a guardian or conservator until there is no choice. If you get the call from Tuality Hospital telling you that grandma is being held in the geriatric psych unit and that they will not release her unless there is a court appointed guardian to make placement decisions, then your have to get yourself to the courthouse. If mother is sending all her money to internet scammers in Nigeria and the bank tells you that she is over twenty-one and can do whatever she wants, then it is time to go to the courthouse.

On the other hand, if your mother has dementia but is willing to go to a care center, you should talk to the people at the care center. Even is mother is not technically competent to understand all the fine print on the long term care contract, chances are she will be admitted anyway. Don't go to court unless there is no other choice.

If you talk to the people who work for the probate courts, you are likely to hear that the judges and others who work there are the last bastion of protection for the disabled and elderly. There is some truth to that, and in the bad cases the court plays a crucial role in protecting the vulnerable. On the other hand, the courts provide neither care nor money for care. The courts provide oversight, but at an enormous cost. Filing fees are significant and attorney fees make any trip to the courthouse an expensive proposition. The paperwork required to satisfy court oversight goes on and on. There exists a small cadre of attorneys, visitors, professional fiduciaries, and experts who make a living off the state court system for protecting the vulnerable. I am one of those. You do not want your mother's money going to keep all these people in business unless you have no choice.

There is an axiom in my business that the court ill not allow prophylactic protection in fiduciary proceedings. That is a fancy way of saying that the court will not appoint a guardian or conservator because the elder might need one in the future. The need must be immediate and serious. This should be your standard as well.

This is not to say that you shouldn't go see an Oregon elder law lawyer until you have hit the brick wall. A consultation with a lawyer early in the process can set you in the right direction and educate you about your real-life options. An elder law lawyer not only knows the law of guardianships and conservatorships, he or she knows local court procedures, how things work in practice (rather than in theory), and  the attitude toward various kinds of cases taken by the local probate court. Sometimes, knowing the personalities of the people who will be handling your legal paperwork is as important as knowing the law. It is well worth the money to get this kind of insider insight from a lawyer early in the process,

To sum it up, go to a lawyer at the first sign of trouble and go to court when you have no other choice.