Establishing a Joint Bank Account with Elderly Parent: Pros and Cons
Concerned about your aging parent’s finances, but you’re not sure how best to help them? You might be wondering what options are available to you to help manage your senior parent’s savings. Can you have a joint bank account with a parent? The quick and simple answer is yes; however, there are some things you should consider before taking that step. In this article, we’ll help you weigh the pros and cons of opening a joint bank account with an elderly parent to determine whether it’s the right move for you.
Who Owns Money in a Joint Bank Account?
When you first open a joint bank account, both owners must provide an application with personal details for each individual. In addition, many banks will require that each applicant be physically present to open a joint account. This allows the bank to ensure agreement between all parties as to the important details of the account ownership and access, as well as any customization you’d like the account to have.
In terms of ownership, each owner officially added to the joint account has the right to manage the account entirely, including the withdrawal and deposit of any funds. This is the case even if one owner is designated as the “primary” account holder; once the funds are in the account, they belong equally to each account holder as listed on the joint account, regardless of who contributes to the account income. In addition to managing the funds in the account, each owner also has the right to close out the account entirely. The only rule in place for most banks is that no account holder can remove the other from an account without that person’s explicit consent.
You might be wondering, what happens to a joint account when one owner dies? Does the other owner have to migrate the account to a new individual account? Are there any rules or processes in place for accessing the remaining funds? In most cases, banks have a “survivorship” clause, which states that account funds will be distributed to surviving account holders equally if one account holder passes away. Since most accounts have only two owners, that means 100% of the funds in the joint account would be designated as the property of the surviving individual. The only time this might not occur is if the account is operated under a “tenancy in common” rule, where the owners agree in advance to an amount that will go to the deceased owner’s estate rather than to the surviving individual.
Pros and Cons of Joint Accounts
One of the most obvious benefits to opening a joint account with your aging parent is that you can help them manage their finances to make sure bills are paid on time if they start to become forgetful or begin to experience memory issues or issues with impulsivity. Some other benefits of opening a joint account include:
- Simplifying household finances by making it easy to share funds and pay shared bills.
- Tracking your parent’s purchases and bank statements to ensure they don’t fall victim to elderly fraud scams, which are sadly becoming more and more frequent.
- Paying for caregiving expenses, including home care and housekeeping.
- Paying for emergency care if your parent requires immediate medical care.
- Accessing funds more easily after a death, without having to go through the probate process.
While there are some benefits, there are also drawbacks to establishing a joint account with a senior parent:
- Listing your senior parent as an owner on the account gives them complete access to the funds, which means they can withdraw funds without approval. This might become an issue if they are targeted by elderly fraud scams or if they have memory or impulse issues.
- Likewise, the senior parent takes a risk in allowing the child to be a full owner of the account, as it becomes possible for the child to take money at any time without the parent’s consent.
- Qualifying for benefits may become more complicated, as establishment of a shared bank account could inflate your parent’s income threshold to the point where they no longer qualify for assistance.
- Tax filings and divorce proceedings may become more complicated, or the account could be accessed by creditors of either owner when looking to satisfy debts.
Finally, what about tax implications? Are joint accounts subject to gift tax? The answer isn’t quite so simple as just an easy yes or no. It depends on who is funding the account and how much is being withdrawn. If one of the two account owners does not contribute income to the account, any withdrawals made by that individual can be subject to federal gift taxes once the annual gift exemption of $15,000 is met. This means the individual can withdraw up to $15,000 in funds from the joint account before the gift tax is triggered.
If the potential drawbacks of a joint bank account are concerning, you might consider establishing power of attorney instead to avoid the legal risks associated with joint accounts.
We’re Here to Help
If you’re wondering how you should begin the process of helping your aging parent with their finances, we’re here to help. At Oakley Courts, our assisted living and memory care staff work with residents and families to ensure your loved ones are taken care of every step of the way. And, no matter what size apartment you’re looking for, we don’t require a large buy-in or endowment fee to become a resident. Instead, we offer affordable monthly rents including three meals a day and access to all our Oakley Courts amenities.
Give us a call at 815-233-5129 or schedule a time to drop by. We’d love to show you more about why Oakley Courts Assisted Living & Memory Care is right for your loved one.