When one is coming up with an estate plan there is a common practice that some individuals take part in. That practice is putting their name on a checking account with their child or what is also called having the savings account entitled collectively. There are reasons to title a bank account collectively with a child that would convince someone that this would be a great concept.
A main factor why a moms and dad would do this is that the child would have access to the account immediately if the parent became incapacitated or died. There would not need to be conservator proceedings in the case of incapacity or probate procedures when it comes to death. The bank account would pass straight to the child. This can be a dangerous estate plan. If a child owes money or has financial obligation, then that child’s creditors could connect the financial obligation to the jointly bank account while you are still conscious pay financial obligations that a child might potentially owe.
The child could likewise empty the account themselves since their name is on the account jointly. The most common case is that a child will not empty the whole account, however rather “borrow” from it to pay bills or expenses. Borrowing from the account to pay daily expenses might be a convenient source of cash for the child, however may trigger arguments and disputes when the parent gets their bank statement or the child is not in a hurry to pay it back. A better way to title a bank account is to make a POD (payable on death) classification on the account. This POD classification just needs a basic form to fill out at your bank. This enables the exact same benefits of collectively titling the account because it avoids probate after death, but it secures the account from being targeted by a child’s creditors or from being withdrawn from by a child. A general long lasting power of attorney allows a child to access a savings account when it comes to incapacity of a moms and dad without having to collectively title the bank account.
Jointly titling an account with a child can be a simple and inexpensive estate plan, however dangerous. The easy way out would be to both have title in an account, the option is not that much more complex or costly. Consulting with an estate planning attorney to come up with an estate plan is much less costly than having to tidy up a mess that titling in both names has the prospective to create.