Thinking about combining finances with your elderly parent? A joint bank account works just like a regular account, except it has two or more holders with equal access. They’re a popular choice for married couples and families, but anyone can open an account together, related or not.
Combining bank accounts is an easy way to help your aging parent pay their bills or cover fees for their care. However, this route can come with complications or even the risk of financial damage. Let’s take a look at the pros and cons of opening an account with an elderly parent, followed by other points to consider on the topic. We’ll also list some alternatives to a joint bank account, so you can make an informed decision.
Pros of a Shared Account
A joint account offers some undeniable perks and conveniences when it comes to helping your parent. Here are some advantages:
Convenient way to pay bills: As your parent ages, they might have a harder time with everyday tasks. If you have access to their account, you can take care of their bills for them, set up automatic payments, and more.
Paying medical care costs: Depending on your parent’s health, you may have already hired aides and caregivers to assist them. A shared account enables you to easily pay for these expenses and any emergency care costs.
Monitor purchases: If your parent is suffering from cognitive decline, they’re at a higher risk of encountering fraud or overspending. Having access to their bank details will help you keep an eye on them.
Immediate access: With a joint account, you won’t have to jump through hoops to access funds in the account when your parent passes away. This will make it easier to cover hospice bills and funeral expenses while avoiding the hassle of probate.
Fewer fees: Having a joint account could help you reduce bank fees. For example, most banks have a minimum balance requirement. Combining resources could help you stay above the required amount and lessen the risk of overdraft fines and other penalties.
Cons of a Shared Account
While there are some clear advantages to combining your account with your parent, it comes with risks, too. Let’s take a look at these now:
Financial assistance eligibility: After combining resources, you or your parent might be ineligible for certain types of financial assistance. Medicaid, for example, has an income limit for applicants.
Less privacy: Another potential disadvantage of sharing an account with someone is a lack of privacy. Each account holder will be able to see transaction history, which could make one or both parties feel uncomfortable.
Equal ownership: Once you have a joint account with someone, the funds within it belong equally to both account holders. In other words, either account holder can spend the money without consulting their relative. This is obviously a concern for families with past trust issues.
Financial damage risks: When you share a bank account with someone, you might encounter consequences for their mistakes. If they declare bankruptcy, get divorced, or owe for previous medical costs, the money in the account is at risk.
Should You Share an Account with Your Parent?
A joint account is a great potential option for family members who are open and honest with each other. Combining resources in this way should only be an option with someone you trust fully. Communication is essential when sharing an account, as is laying out specific expectations for how to handle funds.
As mentioned, a joint account can help you bypass probate and cover immediate expenses if your parent dies. If there are multiple heirs involved in the estate settlement, however, the process may not be so straightforward. Even if your parent left a will stating that their assets should be split between surviving siblings, it would all go to you as the joint account holder.
This could cause arguments or strife between surviving family members. So, whether a joint account is right for you will depend on your specific family circumstances, the trust you have with your parent, and other individual factors.
Joint Account Alternatives
Even with the risks involved, many choose to share a bank account with their parents and don’t encounter any problems. If joining your finances with your parent doesn’t sound right for you, you have a few different alternative options to consider:
Power of attorney: Power of attorney enables you to take care of financial issues on behalf of your elderly parent. You can use this to deposit checks, manage investments, pay bills, maintain assets, and more.
Signature authority: Another suitable alternative to a joint account is signature authority, which gives you access to your parent’s account for purchases and bills. Ask your bank branch how to set this up.
Automatic deposit: Instead of opening a shared account, you could open an individual account in your own name to help your parent manage their expenses. Then, set up direct deposit so that the needed amount comes out of your parent’s account automatically every month.
Revocable living trust: Your elderly parent can place funds into a revocable living trust for you, which doesn’t involve the necessity of combining accounts. However, this is only suitable if your parent has sufficient funds for a trust.
Personal money manager: If you decide a joint account isn’t right for your situation, consider hiring a money manager for your parent. Some advisors specialize in elderly financial matters and can assist with paying bills, protecting assets, and other necessities.
Convenience account: A convenience account enables you to sign checks on behalf of the account owner. This option differs from a combined account since you won’t have any legal rights to your parent’s funds beyond that.
As you can see, there’s a lot to consider when it comes to sharing an account with an elderly parent. Be sure to carefully consider every point before you decide which route is best for your family.