Here’s an idea that sounds better than it is: Put children’s names on the parent’s bank account. That way, children can sign checks if parents can’t pay bills when they become ill. When the parents pass, the money goes directly to the children with no court involved. Simple.
Simple does not mean good, however. Joint bank accounts are owned equally by all who are named on the account. All can spend without question. You may not believe that your children would take your money without permission – but what if that child might be going bankrupt, is in a bitter divorce, or is sued in court?
In one bad case, mom went into the hospital and a son on mom’s account saw his chance to go on a spending spree. It took six years of hard-fought litigation, and many thousands in legal fees, for his siblings to recover just a small portion of the misappropriated money. The rest was gone for good.
It is smart to designate a person to pay your bills when you can’t, so get a lawyer to draft a good power of attorney for you. This is much safer. Good power of attorney also permits your agent to stand in your shoes if you plan to qualify for Medicaid, or to file your taxes, or to sell a property if need be. With a power of attorney, you can designate only people whom you trust to take care of your finances responsibly when you can’t.
Then, for a very simple and no-cost way to give money after you pass, you can choose your beneficiaries with a “payable on death” (POD) designation at the bank. This keeps your name, only, on your account while you are alive, and it instructs the bank to convey your money to your beneficiaries only on your passing.
The best way to resist temptation is to avoid the opportunity in the first place.
If you have any questions on sharing financial information with your loved ones, please contact us for a consultation.