As persons age, they are sometimes tempted to add a child’s name to their bank account for the convenience of the elder.
However, there’s an important difference between designating someone as the “joint owner” of a bank account versus an “authorized signer”.
Both joint owners and authorized signers may write checks against the elder’s account, but the similarity ends there.
With joint ownership, both the elder and the child may be considered owners of the assets in the account. An authorized signer is not an owner.
Therefore, a creditor of the child may try to access assets in the elder parent’s joint account (assuming the creditor has obtained a money judgment against the child). A creditor wouldn’t be able to do so if the child was only an authorized signer.
Also, let’s assume that the elder has 3 children, and provides in his or her Will that the 3 children share equally in the elder’s assets after the elder’s death. Joint accounts are not covered by the elder’s Will, which could result in the joint-holder child receiving the remaining assets in the joint account in addition to the child’s equal share of the assets impacted by the Will.
If the elder wants a child to be an authorized signer only, it’s important to work carefully with the financial institution to insure that the financial institution does not misunderstand that choice. Otherwise the financial officer may mistakenly jump to the conclusion that the elder was requesting a “joint” account even though the intent was that the child be an “authorized signer” only.
Designations of (1) ownership of assets and (2) beneficiaries are important aspects of the estate planning process. Consult with an estate planning lawyer to address these topics when reviewing your needs and desires for a Trust and/or Will.
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