Are you considering opening a joint bank account with your aging parent? While it may seem like a convenient way to pay the bills, a joint account has drawbacks that could be financially damaging to you both. Weigh the pros and cons here before heading to the bank.
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A joint bank account is an easy way to assist your aging parent with managing day-to-day finances. Having a joint checking account can help you:
Depending on your financial situation, the decision to combine accounts could be detrimental to both you and your parent. Here are some risks to consider before opening a joint account with your elderly loved one:
Money is the main reason adult siblings fight over their parent’s care, and joint bank accounts can lead to disputes. If one sibling is a primary caregiver, or helps their aging loved one pay bills, it may seem sensible for them to take over an elderly parent’s finances or to set up a joint account.
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But siblings could question how and why money is being spent, says Mike Travers, a certified financial planner in Ontario, Canada. They may accuse the joint account holder of financial abuse, especially if the funds appear to be misappropriated. “Parents need to be mindful of what they may set their children up for,” says Travers.
In families with multiple children, a joint checking account with one child has consequences regarding inheritance. “In most states, upon the parent’s death, the money in the account automatically goes to the child whose name is on the account, thereby disinheriting the other children,” writes Takacs. This is because joint accounts are usually held with rights of survivorship, which means ownership passes automatically from the deceased to their survivor.
A joint account can preclude a will in the case of your loved one’s death, no matter when the account was established. This means the child on the shared account would receive all the money in the account.
The FDIC guide to joint bank accounts provides a potential solution: “While most joint accounts are held with rights of survivorship, in rare instances joint account owners are ‘tenants in common,’ which means ownership does not necessarily pass from decedent to survivor. Instead, each co-owner can bequeath his or her share of the account to whomever he or she chooses.” With this provision, the aging parent could assign their share of the account to a separate child, ensuring it’s split evenly. Consult a financial advisor to see if this provision could apply to your family.
If the risks of a joint bank account outweigh the benefits in your family’s circumstances, consider these alternatives:
Our advisors help 300,000 families each year find the right senior care for their loved ones.
Every family’s financial situation is different. Consider consulting a certified financial advisor to understand how to best help your elderly parents. Visit the Certified Financial Planner Board of Standards to search for one by city, state, or ZIP code. Certified elder law attorneys are often also experts in financial issues related to aging. Visit the National Academy of Elder Law Attorneys to find one in your area.
Before selecting an advisor, ask about their experience with elderly finances. Registered financial gerontologists have extra training in providing financial advice to aging adults and their families. In addition, some geriatric care managers offer financial advising or can link you with an advisor who specializes in elder-care finance.
Sources:
FDIC guide to joint bank accounts
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