For adult kids of aging parents, it's a common question: Should we be listed on Mom and Dad's bank accounts?
This week, Walt Romatowski, a certified financial planner with Castellan Financial Advisors in Roseville, tackles that topic.
I would like a professional's opinion on the pros/cons of adding an adult child's name to an elderly parent's bank accounts. I have heard conflicting opinions from friends and relatives. My belief is that it is a good thing to do and helps tremendously when the time comes to settle the estate. True?
Adding an adult child's name to an elderly parent's bank accounts may seem like an easy way to mitigate future estate issues, but there are problems with this approach, which include:
All account owners have equal rights to deposited funds. Children who are co-owners can make withdrawals from the bank accounts for their own behalf.
The money in the shared account is considered an asset of that child, which means the child's creditors can lay claim to those accounts.
Putting an adult child's name on an account might trigger gift tax issues, if more than $13,000 is withdrawn by the child.
If your primary concern is having the funds readily available after death, (i.e., to avoid delays associated with probate), the bank accounts can be made "Transferable on Death," which means they will automatically transfer to the person named as beneficiary.
If the intent is for the adult child to assist his/her parents with paying bills or looking out for their finances, parents can assign them "Durable Power of Attorney." This gives an adult child the legal authority to act on behalf of a parent. Most importantly, the assets remain with the parents.
To be legal, a power of attorney document must be signed by the parent and adult child, and either be notarized or carry the signatures of two witnesses.
In addition, a child who accepts this "power of attorney" authority has a legal responsibility to look out for the parent's best interests. If this duty is abused, the child can be held accountable.
You can avoid the pitfalls mentioned above by seeking the counsel of a qualified estate planning attorney.
Compiled by Claudia Buck