As our population ages, many adult children are assisting their parents in the management of the parents’ financial affairs. Often, the parent adds the child’s name to bank accounts and investments with the intention that the child take over the day to day management of bill payments and banking transactions. This appears simple and convenient, as well as legal fee free, but it actually exposes the parents’ assets to a number of risks.
A parent creates a situation of joint ownership when he or she adds a child’s name to a bank account. This means the child is a legal owner of part of the money in the account, and this situation can raise a number of problems:
1)The child can access money in the bank account without the parent’s knowledge or permission. The worst case scenario here – and I have acted on files involving this type of theft – is a child taking the parent’s money for the child’s own benefit.
2)If the child has debt, the child’s creditors can also access part of the money in the parent’s bank account.
3)If the child is getting divorced, part of the money in the parent’s bank account could be claimed as matrimonial property by the child’s ex-spouse, who could then receive some of it.
Doing a Power of Attorney is an alternative. A Power of Attorney allows a parent to appoint a child to manage the parent’s financial affairs, and the parent retains full ownership of his or her bank accounts and investments.
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