One of the most commonly asked questions amongst my estate planning clients is, “should I add my adult child to my bank account?” Although it might seem like a good planning idea in the event you have an accident or other incapacitating event, my answer is generally NO! First, when you add your child to your account you are making a gift to that child. If the value of that gift exceeds the annual gift exemption (currently $13,000) you are required to file a gift tax return and, depending on the amount, you possibly have a gift tax liability.
Secondly, by placing your child’s name on the account, you have made her a legal owner of the account. Therefore you are potentially jeopardizing your money, as you are subjecting the money to your child’s liability. Suppose you put your daughter’s name on your bank account. She gets into a car accident and receives a judgment against her. The creditor may attack your bank account to satisfy the judgment against your daughter. It does not matter if she never contributed monies to the account.
Third, it could defeat the terms of your trust agreement and make that account a non-probate transfer.
Finally, if your child is married when you place their name on the account, there is potential that the account could be subject to distribution in a divorce proceeding.
This blog post is only intended for informational purposes. Please feel free to contact me to discuss this topic further.