Some people think that adding their son or daughter to their bank account is a good idea. They take comfort in the fact that a joint account would allow their child to pay their bills if they get sick. A joint account with survivor rights would also avoid probate after their death.

So what can go wrong with a joint bank account? As it turns out, a lot!

What happened to a client of mine should send up a huge red flag for anyone interested in adding his son or daughter to his bank account. John Smith (obviously not his real name) added his daughter to his three bank accounts long before he met with me for estate planning work. After our initial meeting, John's homework was to set up his bank accounts to mirror his estate plan. He soon discovered that his son-in-law had stolen over $200,000.00 from his bank accounts over a number of years. The son-in-law was able to make numerous electronic withdrawals from the accounts because he had the login and password information to John's accounts. John may never recover the money that was taken.

The possibility of theft is just one problem with joint bank accounts. Another problem is that the joint account may not sync with a client's overall estate plan. For example, the client may want to leave all her assets to her four children equally after her death. The joint bank account, however, will not be split four ways after the client passes away. The child listed on the account as joint owner is entitled to 100% of the money in the account and does not have to share one dime with his siblings.

Problems with joint accounts could also arise if the son or daughter goes through a divorce, has creditor issues, or declares bankruptcy. Your money in the joint account may be subject to division, collection or garnishment as a result.

Better alternatives to a joint bank account

I advise my clients to keep bank accounts in their name only or in the name of their Trust. There are limited exceptions to this rule, but no one other than a spouse should be added to a bank account as a joint owner. A strong General Durable Power of Attorney will enable the fiduciary to have access to the account in the event of an emergency. When the account owner passes away, her Trust or Last Will and Testament will dictate who receives the funds, unless beneficiaries have been designated on the account. In that case, the bank will usually pay the funds to the named beneficiaries who are then living. (For further insight into beneficiary designations, see my article titled, Beware of Beneficiary Designations -- They Can Wreck Your Estate Plan.)

The Shinn Law Firm can help.

The attorneys at The Shinn Law Firm have been counseling clients in estate planning matters for 20 years. Please contact us to discuss an estate plan which is specifically targeted to your unique situation.