For many seniors, taking care of their affairs, particularly paying bills, banking, and other financial matters, becomes more and more difficult as the years go by. When this happens, many people opt to have a close relative or other highly trusted person assist them with these matters. The following discussion explores two very common options.
Adding a Co-Owner to Your Bank Account
John Smith decided to add a co-owner to his bank account. He picked his son Robert. As co-owner, Robert was able to make deposits, withdraw funds, and pay all his father’s bills, writing the checks directly from his father’s account.
Seems simple enough – however, there are some serious problems with this approach:
- Misusing funds: Designating a co-owner to your account enables that person to write checks for anything, including his/her personal expenses. While you trust that the co-owner will only utilize your funds for your benefit, this may not always be the case.
- Creditors: If your co-owner gets into financial trouble, his or her creditors may try to seize funds from your account.
- Family conflicts: Issues may arise after your gone regarding who owns the residual assets in the account. Almost all joint accounts include a “right of survivorship” clause designating the surviving co-owner as the lawful owner of remaining funds. In John Smith’s case, he intended the remaining money to be equally divided among his three children. However, as co-owner, the funds belonged to Robert, who was under no legal obligation to share the money with his siblings. Robert chose to keep the money and his siblings took him to court – not something John Smith ever intended.
The Durable Power of Attorney
A Durable Power of Attorney may be a much better approach if you need help managing your financial affairs. John Smith would have been wise to go this route. Under the terms of a Durable Power of Attorney, John would have designated his son, Robert, “attorney in fact.” Robert would then use his father’s account for making deposits, withdrawals, and writing checks, but with two very important restrictions:
- The funds could only be used for his father’s benefit.
- Upon his father’s death, any money remaining in the account would become part of his father’s estate. The funds would not belong to Robert (unlike the “co-owner” situation noted above).
Finally, it should be noted that the Durable Power of Attorney is a much more powerful instrument than the co-owner option. You can designate your “attorney in fact” to act on your behalf regarding all manner of legal matters. It’s up to you regarding how much or how little responsibility you assign to your agent. For many, this flexibility makes it a very useful tool.
Seek Legal Help
When you need help managing your financial affairs, it’s critical that you understand your options. Experienced Estate Planning Attorney, Elga A Goodman, can work with you to explore the various alternatives, and can help you select the most suitable solution for your unique needs. Contact us today at 973-841-5111.
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