Should you have joint bank account with your parent?

Taking care of an aging parent is full of challenges. So on first thought, opening a joint bank account with your mom or dad seems like a no-brainer. Dig deeper though, before you make such a move. For all the advantages, there are risks and complications, according to www.nextavenue.org. “Opening a joint bank account with your aging parent is one of those plans that sounds like a good idea, but usually is not,” says Joshua Zimmelman, a tax accountant and president of Westwood Tax & Consulting in Rockville Centre, New York. Advantages of having a joint bank account A joint bank account can be the simplest and easiest way to help parents pay bills and monitor and track their funds, says Lauren Klein, a Certified Financial Planner and president of Klein Financial Advisors in Newport Beach, California. There is a certain amount of comfort that comes from knowing that your parent’s bills are being paid on time. You can use a parent’s account to make everyday purchases like groceries for him or her as well as to pay for bigger expenses, keeping these separate from your personal accounts. And with your eyes on their account, it is easier for you to spot potential fraud. “It allows the adult child to check for unauthorised purchases or other problems with the account such as late fees or overdrafts,” points out Linda Sherry, director of national priorities for Consumer Action, a consumer advocacy organization in Washington, D.C. Another benefit is that in case of your parent’s death, you would have immediate access to his or her funds, without having to go through probate. This may be especially helpful for paying funeral and other final expenses. Disadvantages of a joint bank account What can go wrong if you have a joint bank account with your parent? Plenty. For starters, your parent’s money won’t be safe from your debts or liabilities. Should something happen to you — like an accident, divorce or bankruptcy —your parent’s money will also be at risk, warns Zimmelman. Also, depending on the rights of survivorship on the account, all the money in the account could go directly to you when your parent dies — disinheriting your siblings. Know too that if you add any money to the account yourself, it may affect your parent’s eligibility for government benefits. A joint account could even affect your child’s student financial aid. That is because government and financial institutions can count all the money in the account as your money, even if half of it is yours and half is your parent’s. Finally, there can be tax implications to having a joint account. “A parent should not simply add the adult child’s name to their account. Similarly, if the parent and adult child open a new account together and the parent deposits a large amount of money and the adult child later withdraws that money, it could be argued this was a gift as well.

Taking care of an aging parent is full of challenges. So on first thought, opening a joint bank account with your mom or dad seems like a no-brainer. Dig deeper though, before you make such a move. For all the advantages, there are risks and complications, according to www.nextavenue.org.

“Opening a joint bank account with your aging parent is one of those plans that sounds like a good idea, but usually is not,” says Joshua Zimmelman, a tax accountant and president of Westwood Tax & Consulting in Rockville Centre, New York.

Advantages of having a joint bank account

A joint bank account can be the simplest and easiest way to help parents pay bills and monitor and track their funds, says Lauren Klein, a Certified Financial Planner and president of Klein Financial Advisors in Newport Beach, California.

There is a certain amount of comfort that comes from knowing that your parent’s bills are being paid on time. You can use a parent’s account to make everyday purchases like groceries for him or her as well as to pay for bigger expenses, keeping these separate from your personal accounts.

And with your eyes on their account, it is easier for you to spot potential fraud. “It allows the adult child to check for unauthorised purchases or other problems with the account such as late fees or overdrafts,” points out Linda Sherry, director of national priorities for Consumer Action, a consumer advocacy organization in Washington, D.C.

Another benefit is that in case of your parent’s death, you would have immediate access to his or her funds, without having to go through probate. This may be especially helpful for paying funeral and other final expenses.

Disadvantages of a joint bank account

What can go wrong if you have a joint bank account with your parent? Plenty.

For starters, your parent’s money won’t be safe from your debts or liabilities. Should something happen to you — like an accident, divorce or bankruptcy —your parent’s money will also be at risk, warns Zimmelman.

Also, depending on the rights of survivorship on the account, all the money in the account could go directly to you when your parent dies — disinheriting your siblings.

Know too that if you add any money to the account yourself, it may affect your parent’s eligibility for government benefits. A joint account could even affect your child’s student financial aid. That is because government and financial institutions can count all the money in the account as your money, even if half of it is yours and half is your parent’s.

 Finally, there can be tax implications to having a joint account.

“A parent should not simply add the adult child’s name to their account.  Similarly, if the parent and adult child open a new account together and the parent deposits a large amount of money and the adult child later withdraws that money, it could be argued this was a gift as well.





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