Joint Bank Account with Senior Parents - Understanding the Pros and Cons (2024)

FAQs

Is it a good idea to have a joint account with an elderly parent? ›

Having a joint bank account with an elderly parent can be convenient, but it usually isn't the ideal approach to helping your parent with money matters. If you have siblings, it easily could lead to disputes.

You could jeopardize your parent's financial security if you have financial challenges. For example, creditors can take the money in the joint account as collateral to settle your debts. Additionally, the funds in the joint bank account can also affect your eligibility to qualify for college financial aid.

Pitfalls of Joint Accounts

Thus, if one spouse has difficulty controlling their spending habits, this may affect the other spouse, who may be more frugal. The frugal spouse cannot challenge the withdrawals or transactions of the other spouse with the bank because they are listed as a joint account holder.

Most estate planning attorneys recommend the use of a POA rather than adding an owner to a joint account.

Joint bank accounts

If one dies, all the money will go to the surviving partner without the need for probate or letters of administration. The bank may need the see the death certificate in order to transfer the money to the other joint owner.

Although it can be useful to have another party available to keep track of bills when you're sick or away, adding a child's name to a bank account may be more of a hassle than it's worth. Doing so may have unintended consequences for both you and the child.

If a person is a joint owner of a bank or building society account with the person who has died, then from the time of the death the joint holder automatically owns the money in the account.

Joint bank account holders generally have the right of survivorship, which grants the surviving account holder ownership of the entire account balance. The surviving account holder retains ownership regardless of which owner contributed the money, and the account doesn't go through the probate process.

Lack of privacy: While keeping secrets is never a great idea in relationships, you and your partner may want some degree of privacy in how you spend your money, which you won't get from having joint accounts. It could also be harder to pull off gifts for each other if your partner can see every purchase you make.

What are the pros and cons of a joint bank account? ›

If the PoA document authorises its Attorney to open, operate and/close any bank account (including a joint one), then he is empowered to close the account. However, a Principal may authorise only to open and operate an account or just operate a bank account on his behalf.

Each person on the account has the legal authority to use the entire account balance for any reason. In contrast, a person holding a power of attorney also has access to the grantor's bank account, but he or she is legally required to use those funds for the benefit of the grantor.

Who Pays Taxes on Interest From a Joint Bank Account? If you have a joint account, you both may have to pay taxes on a portion of the interest income. However, the bank will only send one 1099-INT tax form. You can ask the bank who will receive the form because that person has to list the income on their tax return.

Joint Bank Account Rules on Death

The surviving account holder retains ownership regardless of which owner contributed the money, and the account doesn't go through the probate process. "The joint owner becomes the legal and equitable owner of all funds in a joint account at the instant of death," says Doehring.

It depends on the account agreement and state law. Broadly speaking, if the account has what is termed the “right of survivorship,” all the funds pass directly to the surviving owner. If not, the share of the account belonging to the deceased owner is distributed through his or her estate.