Beware of Joint Bank Accounts Among Family Members

Joint bank accounts with parents and children listed are a convenient way to avoid probate and simplify inheritance after the “last” parent dies.

Unfortunately, there are potentially very serious risks if a child abuses his right to withdraw joint funds originally owned by the parents. Anyone listed on a joint account can withdraw the entire account balance.

There are also risks for the child who withdraws such funds even if the intention is to benefit the parent.

Under Maryland law, as interpreted by the Court of Appeals, the child is vulnerable to criminal charges of theft lodged by a disgruntled parent. The Court ruled this year that being on a joint account no longer makes one a “co-owner” automatically. If, for instance, the parent adds the child to his account for “convenience” (“to help dad with banking needs”), the child becomes a fiduciary to that parent with special responsibilities and both criminal and civil liability risk if alleged to have acted improperly concerning that parent’s “funds”.

The moral: The “easy way” to share control of assets and do “estate planning” on the cheap may not be the best way for all concerned.

Please let me know if you want to review your bank accounts and estate planning situation with me.