Danger of Using Joint Account with a Child

Many people use joint accounts to give their children access to their money.

That often makes sense – but not always.

“Joint” accounts (each account owner has full access to the entire bank balance and the survivor “takes over” the ownership interest of the person who dies first) can avoid probate and provide money for a child to pay a parent’s bills, etc.

But placing a child on a parent’s account involves risks as well. While one certainly hopes that the child is trustworthy, there is always the possibility that a child will use the account money for his own – as opposed to his parent’s – needs. Also, a creditor of a child who gets a judgment can drain that account to pay it since the child is an owner of the joint account.

Suggestion: Take advantage of the joint account option but keep the balance relatively low ($5K-$10K) to minimize temptation and reduce other risks. Money can always be put into the account as needed.