3 Reasons Why Making Your Child A Joint Account Owner Can Be Risky

Parents and their adult child discussing finances, illustrating the risks of making a child a joint account owner

3 Reasons Why Making Your Child A Joint Account Owner Can Be Risky

Adding your child’s name to your bank account as a joint owner seems harmless, but could you be putting yourself at risk?

Let’s review three reasons why listing your child as a joint owner on your bank account can be risky. As we go through each of the risks of listing your child as a co-owner on your account, take a look at your circumstances and consider whether the ease and convenience of joint ownership are really worth it in the long run.

1. Shared Liabilities

Making your child a joint owner on your bank account can put you at risk. While it makes sense perhaps to list your child on your bank account so that you both are prepared in case of an emergency or so that that child can help you with your banking needs, as you get older, creditors will capitalize on this situation. If your child for example runs into trouble with a creditor who’s looking to collect, your entire bank account could be up for grabs Even if you were not involved in any way, just because your child is a co-owner of the account.

2. Divorce

While no one ever plans to get divorced the possibility of divorce is something to consider when listing your child as a co-owner. If your adult child goes through a divorce, their former spouse could be entitled to a portion of your jointly held bank account since it’ll likely be included as part of your child’s assets. Not only will you have to watch your adult child go through the pain of divorce, but also see your hard-earned savings become a part of the dispute. This can add insult to injury for your child who will likely blame themselves for getting you involved in a mess.

3. Estate Planning Implications

Now many banks can set up your joint account to include rights of survivorship. This means that upon the death of either of the owners, the account assets will automatically transfer to the surviving owner. This can create unfortunate consequences for you, your child, and other beneficiaries if you intended for all of your remaining assets to be divided equally among your beneficiaries as stated in your will. If you predecease your child, the joint account will likely undermine your will by transferring all of the assets (funds in the account) to that adult child co-owner and nothing to your other beneficiaries. Fortunately, there are other better ways to give your child access to your account either upon your death or while you’re still living to help you with taking care of business. Many financial institutions will allow you to structure the bank account to transfer on death by adding a beneficiary to your account. If you want your child to have access to your account while you’re still living creating a financial power of attorney is an option. Not only does that document allow your child to perform financial transactions on your behalf, but it’s also a powerful legal document that gives you peace of mind in knowing that your assets will be handled according to your wishes. It’s time to protect your assets the right way.

At the Law Offices of Elsa W. Smith, we counsel our clients about these issues and many others in the estate planning process. Let us help you.

Information in this article is provided for educational purposes only and not intended to constitute legal advice. Please consult with a licensed attorney in your jurisdiction for help with your specific situation.