A few years ago my parents sold their house and gave my brothers and I $12,000 each, but now they need some financial assistance. My brothers and I would like to open an online account and each contribute an equal amount in order to help my parents pay some of their expenses. We want to be able to easily split what is left once they no longer need our help.
If we opened a joint account how would we go about paying the taxes on the interest? Would it be better if we opened the account in one of our names and have that person pay the taxes on his return? Which option would be less complicated?
Opening a joint checking account gives each of you access to the funds, all the funds. One person's Social Security number would be used for tax reporting if this is an interest bearing account, which I assume it will be.
The simplest method is to allow one person to have that tax responsibility and for the others to compensate them when they compute what their liability was on those earnings. The interest earned is dependent on the balance in the account. If the intent is to keep a minimum balance to avoid fees, that is one issue. Otherwise, you may each set an allowance amount that is transfered to your parents account every month. First you determine what amount they should need deposited each month, and then divide that by you and your siblings. That way you don't keep excess funds in the account. It is meant for inflow and outflow and not to be a long term depository. Your parents may already have a no-cost senior account now that would facilitate this.
Another option would be to have an allowance go to a debit card your parents keep and use. Each contributor can still have a preset amount transferred to that card which can be used at a wide variety of retailers and at ATMs for cash. The contributors can also review online statements in the event any of you want to ensure your parents are managing well.
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Opening a joint checking account gives each of you access to the funds, all the funds. One person's Social Security number would be used for tax reporting if this is an interest bearing account, which I assume it will be. 