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Caution needed on joint bank accounts

Opening a joint account with one child could result in unintended issues. It might even provide a larger inheritance to one child after you sought to provide roughly equal gifts to your children in your will.

Your parents may be aging and looking for some help managing their finances. Or it could be that you are now seeking assistance from a local adult child as you transition to an assisted living apartment. We will explain what can happen with joint bank accounts and why a durable power of attorney may be preferable.

Bill paying help

One common suggestion is either to open a jointly titled account or add a name to an existing account. What small mistake can cause problems? Failing to consider what will happen to the assets.

Ask whether you need to designate the joint account “for convenience purposes.” This is the way to say that you do not intend for all the assets to pass to the other person named on the account at death. Then the assets would flow to your estate and your will divides between your heirs according to your wishes.

A common scenario

The issue that can come up is this: Mother (Marilyn) opens a joint account with nearby son (Jonathan) and makes no indication regarding survivorship rights or convenience. Jonathan helps his mother pay the bills, checks in on her several times and week and drives her to all appointments. When Marilyn dies, Jonathan receives the $75,000 remaining in the account. His sisters get none of it and become upset. This happened because the law presumes that a joint account carries the right of survivorship.

Even when siblings get along well, this outcome can cause hard feelings. Frequently, it is not at all what a parent intends after a lifetime trying to treat siblings equally. The use of a durable power of attorney for finances could have avoided the issue in the first place.

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