Putting your child on your bank account is easy, right? The two of you go to a bank, sign a few forms, and now your child can help you pay the bills or monitor your spending activities.
No worries, right?
Let's put aside the scary — but real — possibility that your child might take the opportunity to raid your account. There are other issues which many elders do not think about when setting up a joint bank account which need to be considered.
Under Massachusetts law, the act of adding someone to your bank account is considered to be a gift the moment the two owners sign the bank's paperwork. That means that the money is considered to belong 100% to each owner. Each owner has the right to control the asset and use it for whatever purpose he may wish.
So, a jointly owned asset is always subject to attack by the creditors of either owner. If your child is sued for some reason, your bank account could be tied up and possibly drained by someone with whom you have no legal relationship. You would be forced to go to court and hope that you can prove that the money was really yours.
Second, ownership of the account will pass to your child outside of probate. Maybe this isn't really an issue — for example, if your child is an only child, or you REALLY want to be sure that the money goes to that child at death. But if you have more than one child and you intend your estate to be evenly divided, the fact that the account is not included with the rest of your assets may result in an uneven distribution of your assets.
In other words, let's say you have $50,000 in your joint bank account with your daughter, Sarah. Your Will splits your estate evenly between Sarah and your son, David. Since the estate passing through the will does not include jointly held accounts, that means that Sarah would get $50,000 more than David as a result of your death.
If access by your child's creditors or unequal distribution of your assets isn't what you had in mind for your money, make sure that your child is listed on the bank account as a co-signatory, not a co-owner. If your child has signatory authority, then he can access your account, but does not have ownership interest. You need to be very clear with the bank that you do not want your child to own the account. You will have an easier time defending the account from your child's creditors, because she will not be an owner and will not have the right to use the funds for herself. At your death, the account will be part of your probate estate.