The primary problem with financial accounts held jointly is that one cannot predict the financial outlook of another person. These days, we can barely predict our own financial future, let alone anybody else’s, even if that person is a spouse.
People still, however, assume that married couples are safe when they join finances, but let’s look at Keith and Richard.
As newlyweds, Keith and Richard were head over heels in love. So when the CPA suggested that they keep their own separate accounts and establish a joint account for household expenditures, they smiled and told her she didn’t understand how they wanted to share everything. Ms. CPA just politely smiled back. Several months later, Keith phoned her to find out how to recover money from long overdue child support payments that were taken out of his and Richard’s joint account by Richard’s former partner who lived across country and was the mother of his child. The CPA recommended that Keith contact a lawyer who specialized in child support issues. However, the damage was done; even if the lawyer could recover what was withdrawn, Keith still had to pay the lawyer. So Keith also started thinking about calling another different kind of lawyer.
Next: It’s typical and, at first glance, reasonable for a senior loved one to place a younger family member on the senior’s account jointly.
Grandma Adams may say to her granddaughter, “Liz, if I get sick, I want someone to be able to pay my bills and take care of me.” Liz says, “OK, Grandma.” Liz has the best intentions in the world because she has a nice job and doesn’t need Grandma’s money. However, what Grandma and Liz don’t know is that Liz is about to be laid off because her company just lost its best an only client and, as a result, must shut its doors. Liz has a car note, insurance, credit cards, and charge cards. Even if Liz doesn’t touch Grandma’s money, Liz’s creditors can if she stops making payments.
Elderly parents, like grandparents and for the same reasons, also consider it a good idea to allow children to be on their account jointly, even if the parents have more than one child. Yet, what if the parent wanted the children to split everything equally upon the parent’s death? Do we really believe that Chloe isn’t going to keep all of the remaining money in the account to herself and not split it with her brother?
The best way for an elder to manage this issue is to designate someone as an agent under a property power of attorney. That way, he or she must comply with a higher standard of legal ethics, must keep detailed records, and the agent’s creditors cannot touch the principal’s funds.