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.