Are Joint Accounts with your Children a Good Idea?

By Attorney Ted Brown

Screen Shot 2013-07-10 at 3.21.03 PMI often meet with clients who want their children to be able to access their accounts to help out with writing checks or paying bills. I also frequently meet with children who are glad to help aging parents manage their finances. However, these good intentions can create a very serious risk of major liability if carried out incorrectly.

When going to the bank, parents request that the helper child be “added to the account” which the bank obligingly does. In doing so they make the helper child a legal co-owner of the account. This act financially ties the parent and child exposing both to joint liability.

For example, if the helper child runs into financial difficulties such as a bankruptcy, or a divorce or a lawsuit, the parent’s account is considered to be their asset. Under the law, jointly owned assets are vulnerable to claims of either owner. Therefore the parent’s money can be lost paying for the child’s debts.

Instead of adding the helper child as a co-owner, they should be added as a “Power of Attorney” acting under a properly drafted and executed Power of Attorney document. A Power of Attorney is designed to allows you to appoint someone else to act on your behalf. The Power of Attorney or “Agent” is obligated by law to act in the principal’s best interest but are not personally liable for the debts of the principal. Moreover, the principal is not personally liable for the debts of the agent.

Designating the helper child as a Power of Attorney allows the child to access the account, write checks, pay bills and do everything the parent needs without connecting them personally to the account or exposing assets to the child’s liability.

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