It’s not uncommon for clients to tell me that they’ve added their adult child or children to their bank account. My next question to them is what they mean by that? Did you add the child as an owner to the account, a signatory, power of attorney, or beneficiary? The answer makes a big difference in what rights, if any, they may have transferred to their child and if their assets will transfer after death. Knowing how the accounts are titled and how they will transfer on your death is important to avoid unintended consequences.
Joint ownership: Adding a child or other individual as a joint owner can be an easy way to give an individual both the ability to access your account while you’re living and to transfer the account that person immediately upon your death (without probate – see my article from * as to what probate is). It is important to recognize that if you’ve added a child on to your account as a joint owner, the presumption is that both owners have full control over the account while both are living. So if you have added a child as a joint owner on your account, it is presumed the child has unrestricted access to the funds in the account. Additionally, when you die, joint owners are presumed to have survivorship rights to the account. This means that the surviving joint owner(s) will own the account, without regard for the beneficiary designations on the account or what your Last Will & Testament says.
There are ways to “rebut” this presumption by showing the intent was to create a convenience account only and not to transfer ownership. But this requires evidence of that intent, and if there’s a continued conflict among your children or surviving beneficiaries, it may require court involvement to sort out exactly what was intended. If your goal is to have the joint owner share or split the account proceeds with other children or individuals, there’s no guarantee the survivor will indeed share the account with others. Rather than leave the door open to interpretation of your intent, you should make sure both the ownership and beneficiary designations are what you intend.
Power of attorney: If you don’t intend to have your child be the sole owner of the account after your death, and instead simply want your child to be able to access your account, write checks, check balances, etc., then you should look at other options such as creating a power of attorney. A financial power of attorney document allows you (the “principal”) to appoint an agent to take action on your behalf. Depending on what the specific document allows, this may include the ability to write checks, transfer balances, open or close bank accounts, and even change beneficiary designations.
An important difference between appointing a power of attorney agent versus naming a joint owner is that the power of attorney agent does not have an ownership interest in the account and must take actions for the sole benefit of the principal. Another important distinction is that the power of attorney ends at the principal’s death. So even if child “A” is your power of attorney agent during your life, their access to the account ends at your death. And, even if child “A” was assisting you with the account during your life, you can still name others to receive the proceeds of account upon your death.
Before you add a child or other individual to your bank account, you should think through what you are trying to accomplish with having that person access your account. If you’re working with an estate planning attorney, he or she will be able to advise the best way to go about adding a child to an account based on your goals– both for when you’re living, and for after you pass.
The information in this article is specific to Wisconsin law and general in nature. It is not intended to be legal advice. Gina Ziegelbauer is an estate planning and elder law attorney at Steimle Birschbach, LLC, a law firm with offices in Sheboygan and Manitowoc.