Should I Make My Adult Child a Joint Owner of My Checking Account?

Should I make my adult child a joint owner of my checking account?

I get this question a lot. Here’s my take.

Many older people will name an adult child as a joint owner on a bank account to give that child the ability to pay bills or manage financial assets if the parent becomes incapacitated. Joint ownership can be convenient. It can be easy. It can also create big problems for you and your heirs. Here are five of the most common.

Access and Control

When a bank account is jointly owned, you and all other owners have equal access to and control over the funds. When you die, the surviving joint owners continue to have unrestricted access to the funds, potentially excluding your other heirs from their rightful share.

Probate Avoidance

Joint ownership is often used as a method to avoid probate, the legal process of validating a Will and distributing assets after death. While this can streamline the transfer of assets, it can also bypass your intentions for that asset as outlined in your Will. This could leave your other heirs without the inheritance you wanted them to receive.

Disagreements and Legal Disputes

If there are multiple heirs involved, conflicts may arise over the distribution of funds from the jointly owned account. Disputes could lead to lengthy legal battles, adding stress and expenses for all parties involved. This often happens in families where one sibling, often a primary caregiver, is added as a joint owner and the other siblings are not.

Creditor Claims

If you add a joint owner to a bank account and that joint owner incurs debts or liabilities, or is subject to a legal judgment, creditors may have the right to access the funds in the jointly owned account to satisfy those obligations. This could impact you while you are living, and after you are gone it could impact the inheritance you want your other heirs to receive.   

Joint Owners: An Example

Let’s bring this home to you. Let’s say you have a brokerage account with a balance of $300,000. It’s your biggest asset. When you pass away, you want this account to be split equally between your four children. If you make one of your children a joint owner on this account, when you die, the child who’s the joint owner gets the whole thing. How do you think your other three children will react to this? Trust me, it won’t be pretty.

What do you do instead? There are a few remedies. One is to add the other three children as joint owners. I don’t recommend this. Joint ownership of an asset exposes it to more liability. For example, if one of your children goes through a divorce, has a car accident, ends up with some kind of judgment against them, or has creditors, if they're a joint owner of your $300,000 brokerage account, their portion could be used to satisfy that liability.

A better option is to forego the joint ownership option and add the child to the account as Power of Attorney. This option doesn't give them any ownership rights, which eliminates the chance that your assets might be subject to their liabilities. You can then either name all your children as beneficiaries on the account if you want it to pass outside of probate, or you can forego naming beneficiaries so that the account will go into your probate estate. Believe it or not, there are times when allowing an asset to be part of your probate estate is the right thing to do.

Estate planning is about more than just marching to your attorney’s office and saying you need a Will. You must understand how to create a Will that will function as part of a plan to distribute your assets the way you intend—without creating unnecessary complications for your heirs. The best way to do that is to work with an experienced estate planning attorney who can help you consider the implications of joint ownership.

Would you like to find out if joint ownership is the right option for you? Kimbrough Law can help. Call 706.850.6910 to schedule a confidential consultation.