Pitfalls of Joint Bank Accounts

March 29, 2017

When you find yourself faced with the task of helping an aging parent with their banking and bill paying, making his or her bank account a joint account may seem like the easy answer.  However, there are several pitfalls that you should be aware of before you or your parent takes this step.   To avoid possible unintended consequences from creating multigenerational joint bank accounts, the interests of the aging parent and the entire family might be better served by arranging for the aging parent to grant you a Power of Attorney to assist with financial matters.


Once you place the bank account in joint names, in the eyes of the law, both parties now have full access to the funds in that account.  It does not matter who put the funds into the account, or that the account may have been solely in the name of one of the account owners previously, both joint account holders now have a right to 100% of the account.  A bank would be powerless to stop either of the joint owners from withdrawing all of the funds in the account.


If one of the joint owners has creditors, it would place any assets in the joint account at risk of the collection efforts of the creditor.  This could mean that a parent who places an account in joint names with an adult child could face a situation where that child’s creditors are able to take the funds from that account.  This could happen even if the intention of both was to always treat those funds as the parent’s.


Placing an account in joint names can be considered an improper transfer of assets for Medicaid qualification purposes.  In the event one of the joint owners needs to apply for Medicaid, a transfer of a bank account in to joint names could make them ineligible for Medicaid for a period of time.

Estate Planning

Placing an account in joint names could unintentionally disinherit other beneficiaries.  If a parent places their account in joint names with one child, it will change the distribution of the proceeds of that account when that parent passes away.  That account is no longer governed by the parent’s Will.  If the account contains a large portion of the parent’s estate, this could substantially or completely disinherit other children.  This would result in an unintended disproportionate distribution of their estate.

There is a better way

In order to avoid these problems with joint accounts, you and your loved ones should consider creating a Power of Attorney.  By naming an agent under a Power of Attorney, a parent can give an adult child the ability to assist with banking and finances without changing the ownership of their accounts.

You can contact one of our Estate Planning attorneys, to assist you or your loved ones with establishing a Power of Attorney. If you have any questions, please contact us at 215-345-8888 or via email at main@highswartz.com.

The information above is general: we recommend that you consult an attorney regarding your specific circumstances.  The content of this information is not meant to be considered as legal advice or a substitute for legal representation.

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