A joint account provides each account owner with the right to deposit funds, withdraw funds, and otherwise manage the account. Some senior parents open a joint account with an adult child as an easy solution to both get some help with finances and pass money along to that child upon death. But this simple solution is not always the best solution. Consider these general pros and cons of opening a joint bank account with your child.
Pros of a Joint Account
You’ll have another set of eyes on the account to watch out for suspicious transactions.
Your child can handle banking errands for you, withdrawing cash as needed to pay for your expenses and making deposits on your behalf.
When you pass away, your child has immediate access to the money without going through the probate process.
Cons of a Joint Account
If your child has debts, your child’s creditors can access the joint account to settle them. This can include a divorcing spouse of the other joint owner.
If your child’s family is applying for college financial aid, the joint account assets could affect eligibility for financial aid.
If your child makes withdrawals from the joint account, this could be considered a transfer of assets and negatively affect your access to potential benefits. (Such as if applying for Medicaid or a similar public benefit.)
Tax complications from a joint account can include:
- Both you and your child must report any interest the joint account earns on your federal income tax returns.
- When the co-owners of a joint account aren’t spouses, there may be gift tax consequences.
- The joint account assets can be subject to estate taxes when you pass away because it is a non-probate asset.
Finally, if you have more than one child, having a joint account with one child can cause difficulties among them.
This brief list of pros and cons is for example only but it provides a glimpse of what the decision-making process looks like. Every family situation is different and a joint account is one of many solutions to consider for handling your finances.
Meet with a Corning Elder Law Attorney
If you’re considering a joint account with an adult child, it may be time to have a bigger conversation about your finances and how they can be managed. Roth Elder Law, PLLC can help you determine the best solution for handling your finances at this time in your life. Call us today to schedule an initial meeting at 607-962-6162 or complete this intake form and we’ll be in touch.