Clients often ask me if they should add their child’s name to a checking or saving account for estate planning purposes. The problem with this approach is that it has several risks, which I’ve summarized below.
Money could be subject to your child’s creditors - in other words, your child’s potential creditors are now yours so if your child gets into a tough spot financially - e.g., divorce, lawsuits, bankruptcy, etc. - then that risk becomes your own with respect to that account.
May interfere with your estate planning wishes because only the named child will inherit the full account and, by law, nothing in the account would go to your other children.
May impact financial aid of your child if he or she has kids (i.e., your grandchildren) approaching or in college.
May impact health benefits if you need to apply for Medicaid
May have gift tax implications depending on the size of the account.
So what’s the solution?
The simplest solution is to give your child power of attorney and/or signing authority on the account so they can access or pay your bills for you without having to worry about all the risks mentioned above. You should also make sure to update the pay on death “POD” or transfer on death “TOD” designation on the accounts so the correct persons are named to inherit the account(s) without having to go through probate.
Interested in updating your estate plan? Give me a call at 781 202 6368, email jlento@perennialtrust.com, or click here to schedule your free personal consultation.
I’m always happy to help,
Joseph M. Lento, J.D.
Your Local Estate Planning Attorney
For client testimonials, please visit: www.PerennialEstatePlanning.com
Conveniently located at 477 Main Street, Stoneham, MA 02180
Other helpful links:
https://www.tn-elderlaw.com/free-resources/resources/joint-accounts-are-usually-bad
https://generationslawgroup.com/should-i-add-my-adult-child-to-my-bank-account/amp
