Giving A Child Access to Bank Accounts? Should I?

POSTED ON: December 31, 2021
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Unless you’ve made plans in advance by giving a child access to bank accounts, your loved ones might find themselves in a financial jam after you die. There are a number of steps you can take now to prevent this from happening. Since none of us knows when this will happen, it’s best not to delay. That’s the advice from a recent article titled 2 Ways to Give Loved Ones Access to Your Bank Accounts After You Die” from Next Avenue.

A bank account only in one person’s name takes time and a big effort to gain access to, but this can be fixed. Designate a beneficiary on your bank accounts, including checking or money market accounts, CDs (Certificate of Deposits), and others through Payable on Death (POD) accounts. They are sometimes called Transfer on Death or Totten accounts.

Not only does giving a child access to bank accounts will address the access issue, but depending on the laws of your state, these accounts don’t go through probate.

However, there is a downside, and it could be a big one. If the funds in these accounts are intended for other heirs, there will be no way for other heirs to retrieve assets if the person on the account does not want to share. That’s something you need to discuss with an estate planning attorney. You may wish to limit the amount of money in your checking account, for instance, so your child can easily pay for your funeral, while keeping most other and larger assets in a trust for other beneficiaries.

Using a trust avoids probate and protects your wishes for the assets.

When adding someone to your bank account or opening a new one, simply ask the bank to provide their form to name someone or more than one person, as the Payable on Death beneficiary. The withdrawal will still take some effort, as the person will need to provide a death certificate and identification. You could name one child, or name all of your children.

Another means of accomplishing this is to create a separate bank account with co-owner status. Jointly held accounts or co-owner bank accounts also bypass probate and are fairly straightforward, when owned by married couples.

However, like the downside mentioned above, giving a child access to bank accounts can lead to unintended consequences. If the co-owner empties the account, you have no legal recourse. The same goes for creditors of the co-owner.

Having a will and discussing how trusts can protect your estate plan is a better way to go. Trusts allow for a great deal of control of your assets, while protecting heirs from creditors.

If you have no will at all, and financial accounts have no POD designations or co-owners, the state’s law will be used to determine what happens to your assets, which will all go through probate. Talk with an experienced estate planning attorney to protect yourself and your loved ones.

Reference: Next Avenue (Sep. 29, 2021) 2 Ways to Give Loved Ones Access to Your Bank Accounts After You Die”

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