The decision to manage finances can weigh heavily on families, especially the finances of an aging parent. Properly managed finances can bring a sense of safety and security, not only to aging parents or family members, but also to their children or adult caregivers. Especially with the increase in online shopping, it is easy to manipulate those who are not as computer literate, as well as those who may not be able to recognize online scams. Furthermore, as we age, care tasks like paying bills and other financial responsibilities can be frustrating, confusing and at times overwhelming. It is common for the adult children of aging parents to assist them in their finances, as those care tasks become more frustrating for them. There are in fact several possible options that are available when deciding the type of role that the adult children take on when assisting their aging parents in their finances.
The Advantages of Having a Joint Account
Adding on an adult child to their parents’ financial account can seem like an effective solution to the finances problem, as they can assist in safeguarding the elderly parents’ assets. Once added they can take on care tasks such as bill paying, navigating large loans like the mortgage as well as monitoring the account balance to spot issues like double payments or overspending. As well, if this child is an only child it could be effective in the case of when the parent dies the account will pass to the surviving joint owner without requiring probate. This can be an effective solution, as it can allow for peace of mind for both the parent and their progeny.
Disadvantages to Having a Joint Account
While a joint account can be the solution to the problem of navigating aging parents’ finances, there are also some disadvantages. In the case of creditors, if the adult child has debt then the creditors for that debt can go after the elderly parents’ account to settle up the debt. In this circumstance, it is important to consider not only the personality of the adult child chosen for the job of managing finances but also emergency circumstances that are beyond their control, such as health emergencies. Another downside to consider is whether the joint owner of the account, in this case the adult child, will inherit all the money in that account rather than be distributed according to the will. In some areas, the joint owner of the account will receive all the funds of the account regardless of the will of the parents. They may choose to distribute the funds to the other children of the parents, but they are not legally required to do so. If the joint owner chooses to keep the funds it will essentially disinherit their siblings from the parents’ intended estate plan. Thus, it is always important to assess the situation and possible complications with family members before determining how to manage an aging loved one’s finances.
Power of Attorney
As stated above, there can be many risks and dangers to having a joint account between an aging parent and their progeny. However, there is another option if the risks seem to outweigh the benefits in a jointly held account. The parent can decide to execute a power of attorney where they choose one of their children to grant the power to make financial decisions in their stead. The advantage of this is that the chosen progeny will be able to assist their aging love one, but this method does not give them direct ownership of their parent’s financial accounts. Thus, when the parent passes their Will can be properly executed. An effectively executed power of attorney can safeguard their parents’ accounts without the possible legal and financial risks of a joint account.
You and your family know your circumstances best, however, consulting with your bank representative, financial adviser and lawyer will safeguard your elderly parents accounts and provide necessary information to assist in the decision making.