When one is developing an estate plan there is a common practice that some people engage in. That practice is putting their name on a checking account with their child or what is also known as having the savings account entitled jointly. There are reasons to title a savings account jointly with a child that would encourage somebody that this would be an excellent idea.
A primary reason a parent would do this is that the child would have access to the account instantly if the moms and dad became incapacitated or died. There would not need to be conservator proceedings in the case of inability or probate proceedings in the case of death. The checking account would pass directly to the child. This can be a dangerous estate plan though. If a child owes loan or has financial obligation, then that child’s lenders could connect the financial obligation to the jointly bank account while you are still conscious pay debts that a child may possibly owe.
The child could also empty the account themselves since their name is on the account jointly. The most common case is that a child will not empty the entire account, however rather “obtain” from it to pay expenses or costs. Borrowing from the account to pay daily bills might be a hassle-free source of money for the child, however may cause arguments and disagreements when the moms and dad gets their bank declaration or the child is not in a hurry to pay it back. A much better method to title a checking account is to make a POD (payable on death) designation on the account. This POD classification only needs an easy form to submit at your bank. This enables the same advantages of jointly entitling the account because it skips probate after death, however it protects the account from being targeted by a child’s creditors or from being withdrawn from by a child. A basic durable power of attorney permits a child to access a checking account in the case of incapacity of a parent without needing to collectively title the bank account.
Jointly entitling an account with a child can be an easy and inexpensive estate plan, but risky. Although the easy method out would be to both have title in an account, the option is not that far more complicated or pricey. Consulting with an estate planning attorney to come up with an estate plan is much less pricey than needing to tidy up a mess that titling in both names has the possible to produce.