The Pros and Cons of Adding Your Adult Child to Your Bank Account

There comes a time in many people’s lives when their adult children begin to help out with daily tasks. For some people this includes writing checks and paying bills. Many people begin to wonder if they should take steps to make being taken care of easier for their caregivers. In these cases, the question arises “why not just add your adult child to your bank account?”.

The Pros

The most obvious and powerful positive for adding an adult child to your bank account is ease of access. As joint owner, your child will be able to access funds from the account in order to assist you with bill paying and other financial matters.

Adding your child to your bank account can also be used as a means to transfer assets. Joint accounts with rights of survivorship will be transferred to the survivor in the event of a death. In many instances, this can make distribution of these assets a simpler and more efficient process.

The Cons

Joint ownership of assets that are used to streamline inheritance can cause issues for those whose children predecease them. Although no parent wants to consider outliving their child, it is a possibility. Removing a joint owner who is deceased from your bank account can be a headache. Making multiple changes to your bank ownership can negate the simplicity originally sought. Estate planning is about planning for all contingencies even the worst case scenarios.

If your child encounters financial issues in the future such as large debts, joint bank accounts, including your account, will be within the reach of creditors. A creditor could attach a lien on the account and could put your funds at risk. Proper planning can help protect your money from your child’s creditors.

This joint account will also be included in your child’s taxable estate, which in cases of large estates could have implications when filing a federal estate tax return. The tax implications of a joint account could create unwanted financial issues for your child.

Informed Decision

While there is no blanket solution to estate planning issues, it is important that you consider all possible outcomes. Adding your child to your bank account may seem like a simple solution to the problem at hand, it could have financial and tax ramifications for years to come.

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