Having an adult child added as an owner of bank account is a fairly common occurrence that allows both elderly parent and child to have access to the account if the parent needs assistance in managing their money. But most people don't know that by titling an account differently, the account can still be accessible without being owned by the child when the parent passes away.
When an elderly parent wants an adult child to assist with financial affairs, how the account is titled is important, according to "Titling Mistakes Can Disrupt Estate Plans," from financialplanning.com.
Most people set up these accounts as a joint tenant with right of survivorship (JTWROS). But these accounts pass to the survivor at the parent's death. If the parent wanted any of the money in the account to go to any other heirs, that will not happen. There is however an alternative. By setting up a "convenience account" with an adult child, an elderly parent can allow an adult child to help with paying bills but when the parent passes away, the balance in a convenience account will not belong to the child.
A convenience account is strictly for situations where one owner wants another person to have access to funds to pay bills, such as with an elderly parent. Many states allow these convenience accounts that let someone use the funds for the original owner's benefit, but the convenience signer doesn't own the account.
Convenience accounts do not pass to the other owner at death. The account can lead either to a future probate of the account or the convenience owner walking off with the funds because he thinks he deserves them.
Creating a JTWROS account to help an elderly person may lead to family issues. It isn't uncommon to see an adult child assisting his or her parents with their finances as they get older, but families need to exercise caution when they consider retitling accounts.
As an example, one daughter wanted to be put on all of her mother's accounts. This would've created a potential issue at the time of passing. Even worse, it could precipitate theft or misappropriation of the funds. The family should use a power of attorney instead. A power of attorney ceases at death, so the family would have to file with the court to get to any open accounts after death.
Consult an experienced estate planning attorney before adding a non-spouse to any account.