Co-Ownership of Financial Accounts with Your Children–Tread Carefully!

writing checkElderly clients often ask if they should add one of their children as a co-owner of their bank accounts so that the child can assist the client with the payment of bills. The short answer usually is “No” because this solution can create more problems than it solves.

We generally recommend that clients keep financial assets in their individual names and instead create a durable power of attorney that authorizes one of their children to assist with the management of the client’s finances, including the ability to access the client’s bank accounts to make deposits and pay bills.

If the client adds a child as a co-owner of the client’s financial accounts, this often can lead to fights among the client’s children about who is entitled to inherit the account assets at the client’s death—should the assets pass exclusively to the surviving co-owner (who also typically inherits a portion of the client’s remaining assets) or should they get combined with the client’s other assets and then divided equally among all of the client’s children? The latter is what most clients intend, but if the account designates the child as a joint owner, the child may be legally entitled to inherit the entire account at the parent’s death unless the client’s will contains a provision acknowledging that the co-ownership arrangement was done as an accommodation to the client and that the account should be treated as belonging solely to the client.

Most children do not assert their right to inherit their parents’ financial accounts as surviving co-owner and instead add the account funds back to their parent’s estate so that they can be shared with all of the children.  However, some children take the position that that their parents wanted them to inherit the account or believe that they are entitled to it as recognition for the care-taking and financial management assistance they provided to their parents and family disputes often ensue.  You can avoid these potential disputes by keeping your assets in your own name, and use a durable power of attorney to enable one of your children to assist you with the management of your finances.



About Andy O'Donnell

Andy is a partner of the firm, practicing in the areas of tax law and estate and business planning. He is the former chair of the Trusts and Estates Group, and he currently serves as a member of the Management Committee.
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