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What Does it Mean to ‘Add’ Someone to My Bank Account?

By Ann E. Salek, Attorney at Law
Critchfield, Critchfield & Johnston, Ltd.

As clients age, they often want to make sure one of their children has access to their bank account(s) to pay bills if necessary. I often hear from clients that someone at their bank told them, “We can just add your child to your account. That makes it so easy!” However, most people (including the people at the bank) do not understand the consequences of “adding” someone to their account.
When the bank says they will “add” someone to your account, that typically means the person is added as a joint owner. There are some unintended consequences to making someone a joint owner. For instance, when one joint owner dies, the surviving joint owner owns 100% of the account. That surviving joint owner can do whatever they want with that account. For example, when Mom dies, she wants all of her assets split equally among her children. Her will is written to allocate all assets equally amongst her children. However, Mom adds her son to her bank accounts. When Mom dies, the son is the 100% owner of the bank accounts with no requirement to split the funds equally among his siblings.
Another consequence to adding someone to your bank account is that account is now susceptible to joint owners issues. For example, if that joint owner needs to apply for some type of financial aid (FAFSA) or a governmental benefit (Medicaid), that account is counted as the joint owners’ funds regardless of whether or not that joint owner thinks of those funds as their funds. Furthermore, the account is subject to the creditors of the joint owners and even the divorce of a joint owner.
An alternative to adding someone to your account is to designate someone as having power of attorney on the account. The power of attorney can access the account and use the funds as needed for the owner’s benefit. However, the power of attorney is not an owner of the account. The unintended consequences discussed above are no longer an issue.
I have had clients tell me the bank advised them to just add someone to the account rather than a power of attorney because that way they can avoid probate. This is true. The power of attorney is no longer valid once the grantor dies. However, there are other ways to avoid probate than to add someone as a joint owner.
Joint ownership can be a very useful tool in an estate plan, so long as you fully understand the consequences of joint ownership. In fact, I often advise clients to hold certain property jointly. However, that is usually because I have fully discussed with the clients what their goals are, I am aware of all the assets they own and I understand how joint ownership can successfully work in conjunction with their overall estate plan.

Opinions and claims expressed above are those of the author and do not necessarily reflect those of ScripType Publishing.