Joint ownership of accounts between spouses is common and, in the majority of cases, advisable. However, we are frequently asked by clients if they should add an adult child to their bank accounts. This is almost always ill-advised.
Joint ownership often comes with the “right of survivorship”, meaning that when one account owner dies, the entire account belongs to the survivor. This can be an effective way to avoid probate fees and ease the transition of funds between yourself and your intended beneficiary. However, the use of joint accounts between non-spouses is risky. While seemingly more convenient and cost-effective adding another person to your account reduces your control over those funds and can have detrimental effects.
As co-owner of your bank account, your child has the same rights to that account as you do. In other words, your child can withdraw all of the funds from your account and there is little that you can do about it. In addition, if your child has credit issues or goes through a divorce then the funds in your account may be in jeopardy.
If convenience is what you’re after, consider granting a Power of Attorney instead. A Power of Attorney will provide your child (or whomever you appoint as your Attorney) with access to your accounts for the purpose of paying bills and managing your finances and real estate, but without providing them ownership rights over your funds. Powers of Attorney are not without risk, and your choice of an Attorney is very important. However, Powers of Attorney provide you with better protection than joint ownership. Your “Attorney” does not become an owner, and his or her problems do not become your problems.
If, after careful consideration, you still want to add your adult child to your bank account you should speak with a legal professional first. The law makes some legal presumptions that might not coincide with your wishes so it is very important that you document your intentions clearly and carefully – is it your intention that this child keeps the entire account for him or herself on your death, or do you want this child to share the account with others? Documenting your intentions will help to avoid family upset and costly litigation when you’re gone.