Three Reasons Not To Put Your Child on Your Bank Account | Estate Plan Pros
Three Reasons Not To Put Your Child on Your Bank Account

If you’re like most people, adding your child to your bank account seems like the easiest thing to do, rather than relying on legal documents like a power of attorney.  There are at least three reasons why this estate planning “shortcut” is a bad idea.

Your child may have to pay gift taxes if they do the “right thing” for their siblings

When you add your child to a bank account, they become a co-owner of the account, which means they become the sole owner of the account at your death.  Any money they give to their siblings or anyone else will be considered a gift, and will fall under gift tax rules, not under any inheritance rules.  Currently, the gift tax exclusion amount is $14,000.

You disinherit your other children

As one person found out when her sister decided to keep her father’s $100,000 bank account, there was nothing she could do.  Plus, the estate expenses were paid from other assets of the estate, and nothing from the bank account – that money now belongs to her sister. 

You expose yourself to your child’s financial woes

The worst thing that could potentially happen to your bank account is to have your child’s own financial woes spill over and effect your account.  Because your child’s name is on the account, collectors, creditors, and litigants are all going to be looking at your bank account.  As a co-owner, your child can take money out for any reason, and you won’t have any recourse against them.  If your grandchildren are applying for college loans, your account could get in the way. 

Adding a child to your bank account is one of many choices people make that have unexpected outcomes.  Consulting with a financial planner and an estate planning attorney can help you avoid these pitfalls.

Tags:Durable Power of Attorney

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Erik Hartstrom

Erik is the founder of Estate Plan Pros, a leading estate planning practice in Elk Grove.  Erik’s practice focuses on Estate Planning Law. In Estate Planning, Erik works with clients to make the process simple, so clients can focus on more important things. He is a local authority for specialized estate planning instruments, like Special Needs Trust, Irrevocable Trusts, or other focused documents. Erik has litigated, negotiated, and mediated the gamut of family law cases. With this unique perspective as a family law and estate attorney he can often spot issues otherwise overlooked. Prior to graduating he worked as a legislative analyst for a non-profit organization, and volunteered as a youth counselor. Erik currently participates in local politics and is an active member of his local church. Erik is very happily married and has two young sons. Together, his family loves to get outdoors and enjoy the varied activities the Sacramento region has to offer.


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