When an aging parent needs help managing their finances, a common solution is to add an adult child to their bank account. This seems like a simple and practical solution. The arrangement allows the child to easily pay bills and monitor for fraud on their parent’s behalf. Many people also incorrectly believe it’s a simple way to avoid probate. However, this convenient setup is a legal and emotional time bomb. In fact, joint accounts frequently cause devastating inheritance disputes. These can lead to bitter family feuds that last for a generation.
Here’s why this common practice can be so destructive to family harmony.
The Legal Power of “Right of Survivorship”
The core of the problem lies in a legal concept called “joint tenancy with right of survivorship” (JTWROS). Typically, this is the standard legal status for most joint bank accounts. It means that when one co-owner dies, the other automatically becomes the sole owner of all the funds. This transfer happens instantly and automatically by operation of law. Crucially, it does not matter what the deceased person’s will says. The right of survivorship is a direct contract with the bank that completely overrides a will’s instructions.
The “Convenience Account” That Becomes an Unintentional Inheritance
Let’s look at a classic scenario. A widowed mother has three adult children. She adds her oldest daughter, who lives nearby, to her checking account to help pay bills. The mother’s will clearly states that the estate should be divided equally among all three children. However, when the mother dies, the joint bank account holds $100,000. Legally, that entire amount now belongs solely to the oldest daughter. The will is irrelevant. Therefore, the other two siblings are legally entitled to nothing from that account. The oldest daughter now faces a moral dilemma. Does she honor her mother’s verbal wish, or keep the money that is legally hers?
Why This Leads to a Family Fight
The other two siblings will almost certainly feel their sister received an unfair windfall. They will likely accuse her of violating their mother’s true wishes and taking advantage of her trust. The oldest daughter, on the other hand, might feel entitled to the money. She may see it as compensation for the years she spent as their mother’s primary caregiver. She might also argue that the mother intentionally set up the account as a gift. Because the original intention was never documented, no one can prove who is right. This ambiguity is what tears families apart.
The Argument in Court: A Losing Battle
The other siblings might decide to sue the estate. They could claim the account was only for “convenience” and that their mother never intended the funds as a gift. Unfortunately, this is an incredibly difficult and expensive legal argument to win. The burden of proof is on the people challenging the account’s title. They must provide “clear and convincing evidence” of the deceased person’s true intent. Without a separate written document from the parent, this is nearly impossible to prove. The law will almost always side with the surviving joint owner.
The Proactive, Safer Alternative: A Power of Attorney
The tragedy is that you can completely avoid this situation. A much better and safer legal tool exists: a Durable Power of Attorney (POA). With a POA, the parent (the “principal”) gives a trusted “agent” the legal authority to manage their financial affairs. This allows the adult child to write checks and pay bills on their parent’s behalf. However, a POA does not give the agent any ownership rights. When the parent dies, the POA terminates. Then, the executor distributes the money in the bank account according to the will.
How a POA Prevents Family Conflict
Let’s revisit our scenario. This time, the mother gave her oldest daughter a Power of Attorney instead of adding her to the account. When the mother dies, the POA expires. The $100,000 in her bank account is now part of her probate estate. The executor, following the will’s instructions, will divide that money equally among all three children. This is exactly what the mother intended. The POA allows for the same convenience during the parent’s lifetime but ensures a fair distribution after their death.
Don’t Let Convenience Destroy Your Family
The temptation to use a joint bank account as an easy estate planning tool is strong, but the risks are too great. The legal power of the right of survivorship is absolute. Often, it leads to outcomes that are the complete opposite of what a parent intended. It is a sad truth that joint bank accounts cause inheritance disputes far more often than a well-drafted will ever does. By using a Power of Attorney for lifetime management and a will for after-death distribution, you can ensure your legacy is one of peace, not conflict.
Is it ever a good idea to have a joint bank account with an aging parent, or are the risks always too high? What are your thoughts?
What to Read Next…
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- 6 Family Members Who Might Legally Block Your Final Wishes
- 8 Accounts That Get Frozen the Minute You’re Declared Mentally Unfit
The post How Joint Bank Accounts Cause Inheritance Disputes More Often Than Wills appeared first on Budget and the Bees.
