Taking Care of Mom and Dad: Joint Accounts

Having read all of this detail about powers of attorney and living wills, you might conclude that an easier way to transfer authority over your parents' affairs would be to simply add your name as a coowner of their financial accounts. And you can do this.

However, many of the same problems arise when you add parties to bank accounts or titles to cars, houses and other property. And simply adding your name to a bank account or property title opens up your parents' property to your debts...and creditors.

Most states allow alternatives to joint accounts in the form of transfer-on-death or pay-on-death designations. In these circumstances, you have no present interest in your parents' funds and cannot access them while they're alive. Upon your parents' death, ownership of the property passes automatically to you -- but you have no authority to conduct business for your parents while they're alive.

One problem is that the widely used phrase joint account can have many meanings. With respect to bank accounts in the names of two people, there are actually four different statuses:

1) statutory joint tenancies with right of survivorship;

2) common law joint tenancies with right of survivorship;

3) tenancies in common with no right of survivorship; and

4) convenience accounts in which the surviving joint tenant has no ownership interest.

Confusion about these different meanings of joint accounts is made worse by common bank practices, which don't distinguish these differences.

Bank accounts are frequently used as a convenience device for and older person to enable another person access to funds for a particular purpose or due to the older person's infirmity or ill health. Convincing proof that an account was a convenience device will sometimes defeat your claim to the account as your parents' survivor.

Things that suggest a convenience device include:

• your deceased parent was the sole depositor;
• the funds were used solely for you parent's benefit during his or her lifetime;
• your parent exercised complete control over the account and was the sole person making deposits and withdrawals;
• your parent was elderly and infirm when the account was created;
• you had a confidential relationship with the decedent; and
• the survivorship interest in the account is not consistent with other wills or estate plans made by your parent.

This legal minutia is designed to prevent abuse of older people. And a common form of financial abuse is for a caregiver (often not a family member) to befriend one of your parents...and then offer to sign on to your parent's accounts in order to "make things easier." Once that signing is done, the caregiver takes the money.

The problem of financial abuse of seniors has become so prevalent that most states have implemented laws making it a felony. Some laws provide for enhanced penalties when the victim is over a certain age, usually 65. Considering all of this, a joint account is usually not the best mechanism for transferring financial authority.