Although this question requires a more involved answer, which I will discuss below, the simplest answer takes just one word: NO!  Adding a child to a bank account can be part of the solution to estate planning, but it isn’t the only step you should take.

Adding a child to a bank account as a co-owner solves one problem: who gets the remaining balance in the bank account when you die, but may create a whole new set of problems for that amount.  In addition, adding your child to a bank account only addresses the bank account, not any other assets you may have.  And, even though adding a child to a bank account can solve one aspect of estate planning, there is danger in thinking everything is covered if that is all you do.  As much as it would be amazing to have all of the problems associated with estate planning solved by setting up a child as a co-owner of a bank account, that is just not how things work.

 

Yes, Adding Your Child to Your Bank Account Will Help With the Bank Account

On the plus side, if you add your child to your bank account while you are alive, then your child becomes a joint owner of the account.  As a joint owner, the child will be able to access the bank account while you are alive, to help in paying bills or whatever needs to be done from the bank account.  Having your child as a joint owner also means that when you pass away, your surviving child would be the sole remaining owner of the bank account and the child will be able to get all of the remaining money in the bank account when you pass away.  The surviving child is the sole remaining owner of whatever amount remains in the bank account when you pass away, so it is easy to know that the surviving child receives that money as the sole remaining joint owner of the account.

This is great if you have only one child, but not so great if you have more than one child you want to get the money from a bank account.  If you have multiple children, and only one gets the money from the bank account, the other children may feel slighted or may feel as if they were treated unfairly.  This can happen all on its own, but it is especially apparent if the children are to receive equal portions of money through a will.  Joint ownership of a bank account passes on the money in a bank account to the surviving owner of the account before a will has any control over the bank account.  Children not named as owners on a bank account may feel that they are supposed to get an equal share of the bank account, but if they are not all named as joint owners, that may not be the case.  The joint owner child may share the bank account with the joint owner child’s siblings, but the joint owner child is not legally obligated to do so.  The joint owner child is the legal owner of the funds in the bank account and not legally obligated to share the funds with anyone else, even if a split is described in a will or trust.

By setting one child up as a joint owner, and all children up as equal beneficiaries under a will, you may be unwittingly creating a conflict between your children after your death.  Most of the people I know, and the clients I have, don’t want to create conflicts for their children.  By setting up a full estate plan, including looking at how your beneficiary designation will work in harmony with the estate plan, and not just adding a child to your bank account, you can have an estate plan that will work better for all of your children.

 

Adding Your Child to Your Bank Account Doesn’t Address Other Assets

Adding your child to the bank account tells where the bank account will go after you die, but doesn’t say anything about your other assets.  If you own a home, having a child on the bank account doesn’t say anything about who should inherit the home.  The same is true of other assets, like a car, investment account, IRA or 401(k) or other retirement accounts, or your personal property, furniture, and other assets.  All of these types of assets need to be accounted for in a properly constructed estate plan.  A will or a trust is the proper place to dictate where assets like these should go, and so adding a child to a bank account does not solve estate planning for any of those types of assets.

In addition, none of the previously mentioned estate planning methods or documents addresses who can make decisions on your behalf if you are incapacitated.  You still need a financial power of attorney and a medical power of attorney in that case.  Solving one aspect of estate planning doesn’t mean everything is done, you still need a complete, comprehensive estate plan to address everything a proper estate plan needs to consider.

 

Adding Your Child to Your Estate Plan May Cause Other Problems 

Adding your child to your bank account can also have negative consequences.  If your child accrues a debt, or is found liable for some action and needs to pay out on a judgment, then your assets in the bank account are open to collection for your child’s actions, debts, and liabilities.  If the child is a joint owner of a bank account, then the child’s ownership means the amount in the bank account could be open to collection from the creditor or person who won the judgement.  For most people, this is not really a problem.  For the most part, the child who is joint owner of a bank account is generally fiscally and financially responsible and conducts themselves in a generally responsible manner, so no large judgments of debts would be out there and able to be enforced against your bank account.  However, since that is not always the case, you want to at least consider this potential downside to adding your child to a bank account.

Adding Your Child to Your Bank Account Can Be Part of Your Estate Plan

Adding your child to your bank account can give the child access to your funds while you are alive, which can be quite helpful to an aging parent, and also makes transfer of funds to the surviving child quite simple after a parent’s death.  But, since adding a child to a bank account doesn’t cover other assets, or solve everything in an estate plan, it shouldn’t be the only step taken.  Instead, you really need to set up a full estate plan, including a will or trust, financial and medical powers of attorney, and a living will.  That way, you will have everything covered, and you can have your estate plan include everything it needs to work correctly, not just one part.  If you would like to contact an attorney about setting up a full, complete estate plan, please click the link below.