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Home >> Special Situations >>Incapacitated Individuals
Children's Names on Account of Elderly: Good Idea?
How can an elderly person open an account and put her children's names on it without them taking advantage of this situation?
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 There are a number of things that can be done, and they depend largely on the goal for which the change is made. An account can be made joint with a son or daughter, if the goals are to allow the child to assist with paying bills and managing the account if the parent becomes unable to do so, and to make the child the sole owner of the account on the parent's death. The pluses of this approach are that the child can take care of finances when the parent travels or is hospitalized, and can give control back when the parent is ready to resume handling the account. The child can also monitor activity in the account remotely using Internet banking, to watch for signs that the parent's spending pattern has changed. That kind of attention can catch when regular bills, such as utilities or insurance premiums, aren't getting paid, or when something unusual occurs, such as a large withdrawal that might signal that the elder has been scammed or is losing control.
The child has to be worthy of the parent's trust. Some of the saddest financial crimes against seniors are those committed by family members and third-party caregivers who take advantage of trusting seniors.
An elder can find out if his or her state recognizes a special type of power of attorney that doesn't become effective unless a medical practitioner signs a document stating that the senior can't handle his/her own affairs. Where they are available, the "springing durable power of attorney" avoids the cost and potential publicity of a court proceeding to determine legal capacity. The pluses of this route are that the attorney in fact would have no access to the accounts of the parent unless the parent becomes incapable of handling his/her own affairs. The minuses include the same potential for abuse as the joint account or any power of attorney if the individual given access to the account is unscrupulous.
If managing affairs during the senior's lifetime is not a consideration, the senior could consider making the account payable on his/her death to the son or daughter. That resolves the problem of transferring ownership without having to go through probate while protecting the account during the elder's lifetime. The shortcoming of this route, however, is precisely that it does nothing to help the senior manage the account during his/her lifetime when help might be needed.
The ideal situation, of course, is to have a trusting and supporting relationship with one's children, and to have them work with their parent in designing a flexible, supportive arrangement that can cover things when the parent is temporarily unable to handle an account alone, and step back when the parent can resume control. If that's not possible, there may be another family member who can assume that role. There are other ways to address this puzzle that an attorney, particularly one with experience dealing with the legal needs of the elderly, can discuss with you.
Published on BankingQuestions.com 4/20/09
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