Should I Provide Bank Account Access to My Children?

Bank Account Access
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Giving bank account access should be carefully considered prior to taking action.

As children become adults, they get to know their parents in new ways.

Although parents will always be parents and children will always be children, the relationship begins to resemble more of a peer relationship at the functional level.

Parental advice becomes less focused on rearing functional adults and more focused on providing wisdom for helping their children navigate their own careers, finances, and goals.

Children are also given a more intimate understanding of the financial situation of their parents as their parents prepare for retirement and estate planning.

According to a recent Next Avenue article titled 2 Ways to Give Loved Ones Access to Your Bank Accounts After You Die,” eventually this may involving parents giving bank account access to their children.

Bank account access should not be granted without careful consideration.
There are risks associated with granting bank account access to loved ones.

There are a few ways to accomplish this, but not all are equally beneficial to every family.

One way is to provide access after you have died.

How does one do this?

Beneficiary designations are often available for certain accounts.

These are often available options for checking accounts, savings accounts, Certificate of Deposits (CDs), and money market accounts.

Pay on Death accounts may also be referred to as Totten accounts or Transfer on Death accounts, depending on the institution.

How does one add one of these beneficiaries to an account?

Ask the bank for their form to designate one or more individuals as a Pay on Death beneficiary.

When you place a beneficiary designation on your account, you will be giving your heirs bank account access immediately upon your death.

The heir or heirs will be able to make withdrawals by providing your death certificate and their own identification.

In most states, these accounts will then no longer be subject to probate.

Although this can be a good idea for some families, it has cause problems in others.

How so?

If you name a one person as a beneficiary but want these accounts to be available to and divided among several heirs, there will be no way to enforce this desire.

The person listed as the beneficiary does not have to share, and your other heirs will not have the means to access the funds.

Another option is to work with an experienced estate planning attorney to create a trust.

When a trust has been created, you can fund the trust with the majority of your assets and simply leave enough money in the bank account to pay for funeral or other estate settlement expenses.

The money in the trust can then be distributed to your heirs according to your wishes.

This fulfills the goal of keeping the assets out of probate and also ensuring the assets are divided appropriately among your heirs.

Another option for providing bank account access is to create another bank account with co-owner status.

Because there is a joint owner on the account, it will avoid probate and move to the beneficiary.

With married couples, this is fairly simple.

With other heirs it can be more complicated.

If your child is the co-owner, he or she can drain the account, and you can do nothing about it.

Also, creditors of the co-owner can make claims on the account.

To protect against this situation, a trust is a stronger option.

Work with an experienced estate planning attorney to determine the best way to provide bank account access or alternative ways to distribute assets to heirs and to create a plan to meet your goals.

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

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