Don’t Add Your Child as a Joint Owner on Your Bank Account

So many clients tell me that they want to add a child to their bank account so that the child can help them pay bills and manage their finances, and also so someone will have access to the bank account should anything happen to the parent. I agree – but I don’t agree with the bank’s usual approach which is to just name a child as joint owner and send the customer on her way. 

Naming a child as a joint owner is dangerous. A joint owner has complete rights to the full amount of money in that account. If your daughter wants to withdraw it all, move to Aruba, and never speak to you again, she is well within her rights to do so – the bank can’t stop her. If she gets divorced, gets in a car accident, makes a bad business deal – that money is on the table and you had better believe the opposing attorney will chase after it. “Not fair,” you cry. Technically, there are laws to deal with these scenarios, but it is much easier to avoid them to begin with. 

Don’t let the bank tell you to name a joint owner. Instead, patiently explain your two goals: (1) someone should be able to help with your account while you are living, and (2) someone should have access to the account after your passing (ex. to pay final bills or for a funeral). To accomplish the first, the bank can add your child under a Durable Power of Attorney. I acted as Power of Attorney for a client who had no family, and his checks were printed: “George Clooney, Alexis Levitt, IFF.” I was on the account, but clearly as a Power of Attorney and not a joint owner.

As for the second goal of allowing access to the account after your passing, there are several ways to do this. Some banks list a “beneficiary,” others use “payable on death to,” some use “in trust for.” Note that if you name someone as Power of Attorney, their authority ends at your passing, so you need this second category listed on your account, as well. (And this has the added bonus of allowing this account to pass to a beneficiary without going through probate.)

This will take persistence on your part, and you may have to insist on working with a manager. Most customer service folks at the banks only know to offer you the option of joint ownership.