Joint Bank Account With Elderly Parents – A Good Idea Or Not?

Joint bank accounts can be a convenient way to help with your elderly parent’s finances. It seems like an obvious choice but it may not always be the best way to handle your parent’s financial issues.

If you are considering opening joint checking or savings accounts with your older parent, read this article before you sign on the dotted line. Several unintended consequences can come of choosing this option.

There are benefits and risks to opening a joint bank account between elderly parents and their children.

In some cases, having access to the funds in a joint checking account can help with financial decisions, paying household bills, health insurance bills, etc.

But, there could also be legal risk involved if one parent is incapable of making these types of decisions on their own.

A durable power of attorney agreement offers many similar benefits without any potential for complications or consequences associated with things like tax laws that may come into play when money gets transferred from an individual’s name directly onto another person’s name.

The Pros And Cons Of A Joint Bank Account With Your Elderly Parent

There are some wonderful advantages to a joint bank account between adult children and their elderly parents but there are some disadvantages too.

Take a look at our list of pros and cons so that you can make an educated decision for yourself and your family on this topic.

The Pros

• It’s very easy to set up and does not cost anything. In other words, you don’t need an attorney to open a joint bank account with someone.
• It’s a good way to allow you to easily pay your parent’s bills, to deposit money into the account and to transfer money as well. Basically you are simply another owner of the account and have all the privileges.
• It can help to keep elderly adults from getting scammed. With more eyes on the statements from your financial institutions, the better the chances of spotting a potential scam or an overcharge from the bank.
• It gives you immediate access to funds after your parent passes away.

The Cons

• With a joint account, all parties on that account have access to the money in that account. If one of the account holders suffers from dementia or Alzheimer’s or perhaps an untreated bipolar disorder or schizophrenia – they have the legal right to empty that account or spend the funds without you knowing it.
• Being a joint owner of a bank account will affect your financial status. So, for an elderly person, this money could disqualify them for Medicaid services. And for the adult children, it could disqualify them from any financial aid as in for college.
• If there happens to be a divorce or bankruptcy or financial liens placed on anyone in the joint bank account, then the funds in that account are in jeopardy.
• All parties in the account will have to report any interest earned.
• The money in this joint account can also impact any gift tax issues. This will differ from state to state.
• Joint accounts should not be used when dealing with multiple children because they create problems instead of solving them. Your other siblings might think that you are using their parent’s money for your own benefit if not carefully documenting how the money is being spent and they may assume everything will be yours once your parent passes away.

What Happens To A Joint Account With A Deceased Parent?

If you and your elderly parent share a joint bank account, then once the parent passes away, the funds in that account are automatically transferred to you – the account owner.

This is true if it’s set up as “Joint With Rights Of Survivorship“.

This can be very helpful if you have to pay any credit card debt left by your parent, funeral bills, etc.

You may have to pay inheritance tax on this amount of money. But check with your accountant or estate planning attorney as this may differ from state to state or country to country.

What To Do Instead Of A Joint Bank Account

After looking through the pros and cons listed above – you may have decided the the cons outweigh the pros. If this is the case then what is a better option for you and your family?

There are actually a few options to consider.

• If you are concerned that your elderly parent is not paying their bills on time or that they may get scammed then speak to your parent and their bank about options to simply have “view only” access or alerts sent to your phone.
• You can also consider being an “authorized signer” on the account instead of a joint account holder. This allows you to make transactions for your parent. Check with the bank about any limitations with this option.
• Another option to discuss with your financial institution is a convenience account. This allows you to pay bills on behalf of your parent but there can be some legal risks after your parent passes away.
• Financial power of attorney is the safest and best option but you will need to use an elder law attorney to draw up the legal documents. This type of power attorney gives you access to ALL of your parent’s financial accounts, including the bank account and investment accounts.
  Know that with this option, you are required to be their fiduciary which basically means that you are responsible for managing your parent’s money for THEIR best interests. This helps to protect elderly parents from being scammed by their adult children.

Many bank officers don’t like the signature authority law. When you give your child signature authority, your child’s name usually is not listed on the check. It is more convenient for the bank to have your child’s name as a joint owner on the account because the bank doesn’t ever have to refer to the signature card. What’s convenient for the bank is not necessarily what’s best for you.

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I recommend to speak to an elderly law attorney and/or financial advisor about these options and discuss the pros and cons with him/her to help you identify which is the best solution for you and your family.

This account is opened with the understanding of both parties that after the parent dies, the account is not intended as a gift to the co-owner of the account,” says New York attorney Linda Toga.

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How To Initiate The Conversation About Finances

Many adult children cringe at the prospect of having “the talk” about financial affairs with their older parents. It’s a touchy subject and can easily be met with great resistance.

The first time you broach the subject, emphasize that you are looking for only a high-level overview so that you can have more peace-of-mind that your parents will be well cared for. This initial conversation can then help set the groundwork for future discussions.

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When it comes time to talk about money with your elderly parents, prepare for an uncomfortable conversation.

Discussing finances can be difficult on its own but even more so when it’s combined with aging and health issues.

Please know that if your elderly parent is suffering from dementia or Alzheimer’s or other cognitive issues – the time for “the talk” has come and gone.

The decisions are now in the hands of the family caregivers.

Otherwise, if your older parents have no cognitive issues, I would highly recommend that you begin this very important discussion as soon as possible.

Here are some helpful tips.

• If possible, mention the topic a few times within the span of a few months. You can bring up stories of friends or relatives or perhaps an article you read in the news on this topic. This will plant the seed and give them time to think about it.
• Choose the right time to bring it up. A quiet afternoon would be much better than at a busy family gathering.
• If there are several children in the family, assign the task to the one child that has the best relationship with the parent.
• Focus the conversion on what’s best for your parents and the children. Most parents want what’s best for their children. But, if there are dysfunctional issues within the family then this may not be the best approach.
• It may also be easier to set up a meeting with a financial planner or estate law attorney. You and your parents can then get all the answers you need on this very sensitive topic. And they may listen to the professional with an open ear! (This is the tactic my siblings and I used with our own mother and it worked very well.)

Conclusion

Many married couples use joint accounts – so most individuals are very familiar with how they work. It seems that it would be a very easy and simple way to help your aging parent, and the family too.

But know the pros and cons before you make the decision and of course, discuss the matter with your parents, with their accountant and elder law attorney as well. Proper legal advice will help to give you all the facts you need to make the best choice.