As adults age, taking care of simple tasks that were once routine — such as managing money and paying bills — may become more difficult than they once were. Reduced mental capacity can often result in missed payment deadlines or an inability to remember where money was spent. For most seniors, there comes a point when help is warranted, and there are several ways to assist seniors in managing their money. However, joint accounts generally are not a good idea for most seniors, as they can raise the risk of financial elder abuse. If you suspect that someone you care about has been the victim of financial elder abuse via a joint account, an attorney can help you.
Why Joint Accounts Can Be Attractive to Seniors
Seniors who are having difficulties managing their money often turn to family members — usually adult children — for assistance, and the simplest and most straightforward way to grant access to the funds is to establish a joint account. This allows the senior to maintain control over their money while giving the child full control over it. This arrangement is attractive for several reasons:
- It can ensure that bills are paid on time
- It allows the child to monitor the senior’s finances to track where money is being spent
- It allows for prompt payment for caregivers and aides
- It allows for easy withdrawals to pay for emergency medical care
- It allows the child to make sophisticated financial transactions and investments
- It allows the child to move bill payments to online processing methods
- It gives the child continued access to the funds after the senior dies, thereby avoiding probate
Holding a joint account with an adult child may work out well for some seniors, particularly if there is a high degree of trust and the child has a history of properly managing the parent’s money or making beneficial financial decisions on their behalf.
Joint Accounts Are Ripe for Financial Elder Abuse
While joint accounts may work for some people, however, they generally should be avoided absent compelling evidence of the joint account holder’s trustworthiness. This is because giving third party access to one’s bank account can invite misappropriation. The temptation to use the senior’s money as the joint account holder’s own can prove irresistible to some, and even in the absence of wrongdoing, a joint bank account can negatively affect the senior’s financial prospects. If you’re considering opening a joint account with someone else, please get in touch with an attorney first.
Risks of Joint Accounts
Joint accounts come with significant risks that seniors considering them should be aware of.
Each Party Has Full Control of the Account’s Assets
The greatest risk of joint accounts is also the most obvious. When you open a joint account with someone else, you give that person equal access to and control over it. The joint account holder could use the money to pay the senior’s bills or misappropriate it for their personal use. Further, money in joint accounts is not held 50/50 by each party; each holds 100% of the account’s assets, raising the risk that an unscrupulous joint account holder could drain a significant amount – or all – of the senior’s assets.
The Assets Are Subject to Each Account Holder’s Creditors
Even in the absence of wrongdoing by the joint account holder, their personal spending habits can spell trouble for the senior. Assets held in a joint bank account are subject to each account holder’s creditors, including liens, wage garnishments, debt collections, civil liabilities, divorce settlements, and bankruptcies. For example, if you open a joint account with a married child and the child gets divorced, any money you have in the joint account will be considered part of the child’s assets to be divided in the divorce.
Joint Accounts Can Affect Medicaid Eligibility
Seniors who are applying for Medicaid or who are currently receiving Medicaid should be especially wary of joint bank accounts. When a senior applies for Medicaid, the government looks at the applicant’s assets to determine their financial eligibility. Assets held in joint accounts are generally viewed as solely the applicant’s assets. This could cause the applicant’s net worth to be too high to qualify for Medicaid. On the flip side, transferring assets out of a joint account while receiving Medicaid can jeopardize the recipient’s continued eligibility. Medicaid may view such a transfer as an effort to hide assets (a form of Medicaid fraud) and suspend the recipient’s benefits.
Joint Accounts Can Result in Unintentional Disinheritance
When one joint account holder dies, the assets in the account pass to the other joint account holder without going through probate. This is one of the main advantages of joint accounts. However, the surviving joint account holder is under no obligation to share the assets with anyone else, which raises the risk of accidentally disinheriting other children who are not named as joint account holders.
Alternatives to Joint Accounts
Joint accounts are not the only option for seniors who need help managing their finances or who wish to simplify their estate planning. There are several good alternatives, such as:
- Authorized signers: An authorized signer is a person who has the authority to make withdrawals and deposits, sign checks, and transfer funds but who does not own the assets in the account. Be very careful here, however. Never, ever, grant signing authority to a caregiver, for example.
- Power of attorney: A power of attorney allows a third party to make financial and medical decisions on the principal’s behalf in the event that the principal becomes incapacitated (although there is still a risk of power of attorney fraud). Again – never, ever, grant a caregiver a power of attorney.
- Payable on death provisions: Seniors can add “payable on death” provisions to their bank accounts, which ensures that the money will bypass probate and pass directly to the named beneficiary. If you’re a family member, always check the title of your older loved one’s bank accounts to make sure no one has been added as a “POD” (payable on death) or “FBO” (for benefit of) beneficiary.
Discuss Whether a Joint Account Is Right for You with an Attorney
If you are considering opening a joint account with someone else, you should consider speaking to an attorney who can help you determine whether doing so is in your best interests. For confidential counseling, please contact attorney Ingrid Evans at the Evans Law Firm, Inc., by using our online form or calling us at 415-441-8669 or toll-free at 1-888-50EVANS (888-503-8267).
