The motivation for this question almost always is that the parent feels that adding the child’s name to an account will allow the child convenient access if the parent needs help managing things. Another reason is the belief that making the account “joint” will avoid the need to deal with the Probate Court. So, should you go ahead and do it? As with many legal questions, the answer is an annoying “it depends.” Usually the answer is no, but sometimes it is yes.
Here are 4 factors that should be considered:
- Right of owner to take money out of the account: Joint owners of a bank account each have full access to 100% of the funds in the account. Each account owner may unilaterally spend, gift, or transfer funds in the account without the consent or knowledge of the other account owner. Are you sure that is safe?
- Survivor automatically becomes sole owner. If the parent dies before the child, the child has immediate access to the account without asking the Probate Court for permission. That is good. However, it also means that the joint owner child owns the account. Do you have other children who were supposed to share the account? You will need to trust the joint owner child to share the funds to make that happen. Can you do so?
- Account assets still reported to Probate Court. The value of 50% of the funds in the account (as of the date of the parent’s death) must be reported to the Probate Court on the Connecticut Estate Tax Return. This Tax Return must be filed with the Probate Court – even if no estate taxes are due.
- What if the child gets into trouble? An attachment or judgement creditor of the child may have access to the money in the account. If the child’s marriage fails, the money in the account needs to be disclosed in the divorce case. Might that be an issue for you?
What can be done? Access, not ownership: Because of the risks of joint ownership, granting nothing more than access to the account may be a better way to proceed. For example:
- A Durable Power of Attorney. A parent can execute a Durable Power of Attorney Instrument to give a child access to the account, without giving the child ownership of the account.
- Revocable Trust. A parent can execute a Revocable Trust and title the account in the name of the Revocable Trust. That will allow the bank account to be managed and accessed by the child without giving the child ownership of the account.
If you are interested in learning more about whether adding your child to a bank account makes sense for you, please visit our website and read our blog for recent posts. For advice specific to you or your family, please contact the office. We would be glad to meet with you for a no hassle, no charge initial consultation, no matter how long it lasts.