By: Kristin K. Vanpraet

Attorney & Counselor at Law

Shepard Law Office PLC

Many of my clients tell me they have put their child’s name on their bank accounts. They usually have done this for one or both of the following reasons: First, they want their child to be able help them pay their bills and look out for their finances. The second is they want to avoid probate.

Consequences:

While doing this may do what they want it to, I usually advise against it. Many people don’t know that putting your child (or any other person) on your account has the following downsides:

1. The money in that account now legally belongs to your child as well as to you.
2. The money in that account is now counted as an asset for that child.

What does this mean? It means that your child may spend that money without having to be held responsible to you. Because their name is on the account, it is their money. Additionally, any of their creditors can get hold of the money in that account. If your child defaults on a loan or is loses a lawsuit and a court orders them to pay money, money in your account may be taken to pay the money they owe..

A Better Solution:

Management of Finances - A better way to give your child the authority to help you financially is to make a Durable Power of Attorney. This document will give them legal authority to act on your behalf, but your assets do not become theirs. Additionally, by legally accepting this authority, they will have a responsibility to act in your best interests. If they abuse their position, they can be held accountable.

Probate - To avoid probate, most financial institutions will let you to make your accounts transferable on death. This means that when you die, the account will automatically transfer to the person you have named.

Conclusion:

While you want your children to have the ability to assist you, and you don’t want your family to have to go through probate, putting their name on your account is not the answer. The methods suggested above are much safer techniques to use to accomplish your goals. They let your children to assist you and still protect your assets.