Is a Joint Bank Account With an Elderly Parent Right for You?

Are you considering opening a joint bank account with your aging parent? While it may seem like a convenient way to pay the bills, a joint account has drawbacks that could be financially damaging to you both.Weigh the pros and cons here before heading to the bank.Advantages of a joint bank accountA joint bank account is an easy way to assist your aging parent with managing day-to-day finances.Having a joint checking account can help you:Ensure bills are paid on time.You can easily pay your parents bills with automatic payments or checks from the joint account.Monitor your mom or dads finances.Seniors are oftentargets of fraud.

Regularly checking their account statements makes it easier to spot.If youre worried your parent may be suffering cognitive decline, you can also keep track of their purchases to make sure they arent overspending.Pay caregivers and aides.Regular caregiving expenses, including housekeeping and home care, can be paid from the joint account.Pay for emergency medical care.If your elderly parent requires immediate payment for medical care, you can draw from the joint account.Access funds after your parent dies.With a joint checking account, you have immediate access to funds withouthaving to go through probate.This can help with funeral expenses and hospital or hospice bills.Risks of a joint bank account with an elderly parentDepending on your financial situation, the decision to combine accounts could be detrimental to both you and your parent.

Here are some risks to consider before opening a joint account with your elderly loved one:Rights of ownership.The money in that joint account is now owned equally by the parent and the child, writesTimothy L.Takacs, a certified elder law attorney in Hendersonville, Tennessee.This means the child can take out money at any time without the parents consent.

In other words, the money isnt split 50/50.Either person can withdraw the entire account without penalty.Financial qualification.The funds in the account can affect your ability to qualify for financial assistance.For example, sharing a bank account could put an elderly parent above the income threshold for Medicaid.

It could also affect financial aid for prospective college students.Risk of damage or debt.Joint bank accounts are subject to liens, debt collection, divorces, and bankruptcy.This can put either party in financial danger due to the others circumstances.If the adult child on the bank account gets divorced, their parents contributions can be considered part of their assets to be split in the separation.If either party declares bankruptcy, the entire account is considered an asset.Creditors can pursue the funds if either party owes money for medical bills, child support, etc.Accessingan elderly parents bank account with siblingsMoney is the main reasonadult siblings fight over their parents care, and joint bank accounts can lead to disputes.If one sibling is a primary caregiver, or helps their aging loved one pay bills, it may seem sensible for them to take over an elderly parents finances or to set up a joint account.But siblings could question how and why money is being spent, says Mike Travers, a certified financial planner in Ontario, Canada.

They may accuse the joint account holder of financial abuse, especially if the funds appear to be misappropriated.Parents need to be mindful of what they may set their children up for, says Travers.In families with multiple children, a joint checking account with one child has consequences regarding inheritance.In most states, upon the parents death, the money in the account automatically goes to the child whose name is on the account, thereby disinheriting the other children,writes Takacs.

This is because joint accounts are usually held with rights of survivorship, which means ownership passes automatically from the deceased to their survivor.A joint account can preclude a will in the case of your loved ones death, no matter when the account was established.This means the child on the shared account would receive all the money in the account.The FDIC guide to joint bank accounts provides a potential solution: While most joint accounts are held with rights of survivorship, in rare instances joint account owners are tenants in common, which means ownership does not necessarily pass from decedent to survivor.Instead, each co-owner can bequeath his or her share of the account to whomever he or she chooses.

With this provision, the aging parent could assign their share of the account to a separate child, ensuring its split evenly.Consult a financial advisor to see if this provision could apply to your family.Alternatives to a joint bank accountIf the risks of a joint bank account outweigh the benefits in your familys circumstances, consider these alternatives:Signature authority on accounts.The IRSsuggests signature authority, which allows an adult child access to their aging parents bank account.They can use it to pay bills and make purchases as long as theyre in the loved ones interest.

Your local bank branch can set this up easily with both signatures.Power of attorney.With power of attorney, an adult child can handle financial matters on their aging parents behalf.This means they can deposit social security checks, pay bills, or manage investments.With financial power of attorney, a child can also maintain or sell assets and access bank accounts.

A durable financial power of attorney is recommended, since it remains in effect even if the parent is incapacitated.Payable on death provision.An aging parent can add a payable on death provision to bank accounts, according to Legacy Assurance.This ensures their money will bypass probate and be paid directly to beneficiaries.If they have a will, its important to be sure the two dont contradict each other.Revocable living trust.Aging parents can put money for relatives into a revocable living trust (revocable means parents can alter the trust as long as theyre mentally competent after that, it becomes an irrevocable trust), according to the American Bar Association.

There are three parties involved: the creator, the co-trustee who manages assets (which could be an adult child), and the beneficiaries.This is only a viable option if the elderly parent has sufficient finances to set up a trust.Direct deposit.An adult child can open a checking account in their own name to manage their parents funds.Even though it wont accrue interest, the balance can be altered with regular deposits.

For instance, if a child generally spends $1,000 a month on their parents care, the parents individual savings account or trust could automatically deposit that amount on a monthly basis.How to find an expert to help with senior financesEvery familys financial situation is different.Consider consulting a certified financial advisor to understand how to best help your elderly parents.Visit theCertified Financial Planner Board of Standardsto search for one by city, state, or ZIP code.

Certified elder law attorneys are often also experts in financial issues related to aging.Visit theNational Academy of Elder Law Attorneysto find one in your area.Before selecting an advisor, ask about their experience with elderly finances.Registered financial gerontologists have extra training in providing financial advice to aging adults and their families.

In addition, some geriatric care managers offer financial advising or can link you with an advisor who specializes in elder-care finance.Related ArticlesSimple Steps for Estate Planning
Legal Planning for Seniors
A Place for Mom Financial ToolkitSourcesThe American Bar Association
FDIC guide to joint bank accountsIs a Joint Bank Account With an Elderly Parent Right for You? posted by Claire Samuels
Posted On 09 Apr 2020, By Merritt Whitley