I work with families who have a loved with who has been diagnosed with a cognitive issue and almost without fail, their first step was to add someone to the bank account.
While I am not a lawyer or banker, I can speak to the basic practical issues this can create and when this can be the right next step.
Everyone whose name is on an account can write checks, withdraw money, and use the account for bank transactions. However, it also becomes an “asset” of those named on the bank account. If one account holder owes money, a creditor can try to collect money from the joint bank account. It could also be named in a divorce settlement.
There are pros and cons of naming a joint account holder.
The best first step should be to name someone to act for you for your financial affairs in a Durable Power of Attorney document an estate lawyer can create for you. They can explain all of this in more detail, but the practical matter of naming a joint account holder:
CONS
- The joint account holder can withdraw and use or mismanage your money. There is no guide to how your money should be used.
- Creditors may use legal processes to try to satisfy their debts from your money in the account if your joint account holder has unpaid debts.
- When you die, the money will become the joint account holders without regard to any estate planning provisions you have in place.
PROS:
- The joint account holder can easily act on your behalf and pay your bills.
- The money becomes the individuals when you die so there is no probate or tax reporting.
It was a huge time-saver for me and allowed me to freely and easily step in to help pay for my parent’s care. There is a time and place when adding a loved one to your joint account can be the right choice. Advised.
If you are curious about which option might be right for you, feel free to set up a free 20-minute consultation.
For more information about the variety of ways someone can help with bill pay and banking, visit the Consumer Financial Protection Bureau.