There comes a time when elderly parents may need assistance with their finances. They may need assistance paying bills, making financial decisions, and managing assets. Many families assume it is sufficient to add children to their parents' bank accounts.
However, there could be other matters to consider. Before transferring assets or creating joint accounts, it is best to talk with a Maryland estate planning attorney.
Consequences of Adding Children to a Parents Bank Account
For convenience, many elderly parents add their children to their savings accounts, checking accounts, and other financial accounts. A joint bank account allows an adult child to pay bills, transfer money, and conduct other business related to the financial account. However, both the parent and the child are now owners of the account.
When you add an adult child to a parent's financial account, there could be unintentional consequences, such as:
● The child becomes a joint owner of the account. When the parent dies, any assets in the account pass to the child instead of going through probate, which could be a problem if there are siblings to consider.
● If the child files bankruptcy, goes through a divorce, or has a judgment, the funds in the account could be drawn into the child's financial troubles.
● The adult child could be ineligible for financial aid or other government benefits because the money in the account is included as an asset for the adult child.
● There is a chance of elder abuse when adding someone to an older adult's account.
● Having joint accounts could complicate qualifying for Medicaid. Many elderly parents need long-term care. All accounts titled in their name must be reported for Medicaid eligibility.
● The account could impact a parent's or a child's credit score.
● There could be unintentional tax consequences for either the parents or the child when reporting income from the account for tax purposes.
There could be other legal risks of adding a child to a parent's bank account to create a "convenience account." It is wise to discuss these issues with financial advisors and elder law attorneys before taking any action.
Is There a Better Way to Help Your Parents with Their Finances?
A durable general power of attorney may be a better option for you and your parents. A general power of attorney allows you to act on your parent's behalf regarding any financial matters. Unless there are restrictions, you can transact any business in your parent's name that your parent could do themselves.
The "durable" part of a power of attorney means that the authority to act does not end if your parent becomes incapacitated. Therefore, a durable general power of attorney would avoid the necessity of petitioning the court for a conservator should your parent's mental state prevent them from handling their affairs.
Contact Our Maryland Estate Planning Attorney for More Information
Assisting elderly parents with their finances can be challenging. An elder law attorney can help you and your parents develop a plan that works best for everyone. Call our office to schedule a consultation with our Maryland estate planning attorney.
