Titling a bank account: why it matters

by Mandy Hicks

estate law
Estate law

By Nathan Vinson
Attorney, ELPO Law

It’s a fairly simple act to add someone as a second account holder on a bank account. Usually, a visit to the bank with both persons and signing a few pieces of paperwork is all it takes. We often see clients add an adult child as a co-owner of a bank account, thinking this will make things easier for them should the child ever need to pay bills on their behalf.

There’s a problem, though, with adding someone as an equal account holder. Upon your death, the survivor can keep all of the money in that account. It bypasses probate and does not become part of the estate.

If you only have one child, that was probably your intention, and that’s perfectly fine. But if you intended for any other children to have part of the funds in that account, they won’t necessarily receive it, unless the child who is co-owner of the account is feeling generous and equitable. We prefer for our clients to prepare for what we often see as reality – children argue often about money left behind.

And here’s one more reason not to add an adult child as co-owner of an account: if the child you’ve added has debts, all of those who your child owes money to can come after those funds upon your death. That includes:

  • judgment creditors, which would be what is created if they’ve lost a lawsuit
  • lien creditors, including the IRS for unpaid income taxes
  • creditor claims in the event the child files for bankruptcy

If you need to give an adult child the ability to handle some financial matters without creating the headaches we’ve outlined above, you have a few more options. Those include adding the child as an authorized signatory, which would mean he or she can sign checks, but otherwise has no control or ownership of the bank account. When you die, the money from that account will go into the estate and will go through probate.

You can also ask the bank to turn the account into a payable-on-death (POD) account, which means that the adult child (or children) would receive the balance upon your death. Banks have various policies on POD accounts, so you need to ask your bank about this. If you want to avoid probate and give one child all of the funds, this is a way to do that.

But the best solution, by far, is to execute a Power of Attorney document. Power of Attorney gives someone close to you – usually a spouse or child – the power to execute agreements and handle your financial affairs if you are incapacitated. For example, if you were in the process of selling your home and involved in an accident, the person who has the Power of Attorney can handle the closing on your behalf and sign paperwork in your absence. Without it, that sale would halt until you were able to sign the documents yourself.

A Power of Attorney document should definitely be part of your estate plan. You should always have someone designed as Power of Attorney who can handle your financial affairs and other matters for you. You can even make the Power of Attorney “springing” if you’re more comfortable with that, which means it doesn’t go into effect until you are no longer able to manage your financial affairs or are incapacitated. Whatever you do, make sure the Power of Attorney is durable, and will be there for you when you need it most.

It may seem like a small matter, but how you title accounts really has an impact when it comes time to settle an estate. Make this part of your discussion with a qualified estate attorney when you’re making plans for the future. You and your family will be glad you handled this before an emergency strikes.

If you don’t have an estate attorney, contact Nathan Vinson, attorney, at (270) 781-6500 or e-mail Nathan at