Is a Joint Bank Account with Elderly Parents Right for You?
If you have aging parents, you may be considering opening a joint bank account with them. That may be a more convenient way to cater to your parents' financial needs, like paying bills, etc. However, to open one or not all depends on your family situation, and there are some benefits and drawbacks of opening such an account.
Let's explore them before you go to the bank.
Pros and Cons of a Joint Bank Account With Elderly Parents
Pros
It's easier to monitor transactions, keep track of account balances and manage your parents' financial needs. This also helps you take note of any potential fraud.
You can easily make transactions at any time and pay for your parents' expenses.
With a joint bank account, you'll have automatic access to the funds if your parents die without following the probate process. You can use the funds in the joint account to handle final expenses.
Cons
You could jeopardize your parent's financial security if you have financial challenges. For example, creditors can take the money in the joint account as collateral to settle your debts. Additionally, the funds in the joint bank account can also affect your eligibility to qualify for college financial aid. It can also affect your parent's eligibility to qualify for Medicaid, which helps cover long-term care costs.
A joint bank account also comes with multiple tax problems. For example, if the account earns interest, you and your parents must file the interest in your federal income tax returns. Additionally, when your parents die, you automatically become the owner of all assets in the joint account. This can put you at loggerheads with your siblings.
Factors You Need to Consider
While there are significant drawbacks to opening a joint bank account with your parents, it can still work for you if all factors are considered. It all depends on your family situation and the risks you're willing to take to safeguard your parent's financial well-being. Alternatively, there are other ways you can achieve that if the risks outweigh the benefits. These alternatives include:
Power of Attorney
A power of attorney gives you the legal right to handle your aging parent's financial responsibilities on their behalf. It means that you can deposit, withdraw, pay bills, and manage other assets. Additionally, a power of attorney allows you to sell assets and access parents' bank accounts. For this, you need a long-term power of attorney that remains valid even if the parent becomes incapacitated.
Signature Authority on Accounts
According to the IRS, adult children can use the signature authority to access an elderly parent's bank account. You can use this method to pay bills and other financial requirements for your aging parents. Your local bank can help you access the bank account with your and your parent's signatures.
Payable on Death Provision
An elderly parent can include a "payable on death" provision to their bank accounts. This makes it easy for the beneficiaries of their assets to receive them directly without the probate process. If the parents left a will, it should spell out the same information as the payable on death provision.
Direct Deposit
With direct deposit, you can open a checking account in your name, but the account would be used specifically to manage your parent's finances. And even if you won't earn interest from the checking account, you can adjust the balance by making regular deposits. For example, if you spend around $1500 per month on your parents' care, your parents' trust or savings account automatically deposits it back into your checking account.
Find Expert Help
Every family's financial circ*mstances are unique. For some, a joint bank account is the way to go. For others, other alternatives can work. Depending on your family situation, a certified financial advisor or elderly welfare expert is better placed to advise you accordingly.
Before choosing an advisor, you should learn about their experience handling elderly finances. At Senior Helpers Charlotte, we have extensive experience of more than ten years serving elderly parents and their families across the Charlotte area. Give us a call today and let's see how we can help.
