The Problem With Adding Your Child to Your Bank Account
A lot of aging parents choose to add their adult children to their bank accounts as a matter of convenience.  After all, if the parent faces hospitalization or incapacity, it sure makes things simple if the child can easily and seamlessly continue paying the bills.  But there are some risks involved with adding a child as a co-signor on your account.   

You could owe the IRS gift taxes. 
If you merely add your child’s name to your account for convenience, you probably never considered it a “gift” of money.  But the IRS may disagree.  As of 2015, the IRS allows you to gift up to $14,000 per year to another person without paying gift taxes or notifying the IRS.  Adding your child’s name to your account may trigger a gift tax, or, at the very least, require you to file forms with the IRS.   

Your assets can be reached by their creditors.
In all likelihood, your child is a pretty responsible kid—otherwise you would not be adding them to your bank account.  But let’s say he loses his job and has trouble paying his bills.  If one of his creditor’s obtains a judgment against him, your entire bank account could be garnished—even if you were not involved with the debt at all.  

Your child’s ex could end up with your money.
If your child ends up getting a divorce, his ex will likely be entitled to a portion of your jointly held account when the assets are divided up.  That’s a hard pill to swallow—but even harder if you are not on good terms with your soon-to-be ex daughter or son-in-law.   

Your estate plan may not accomplish its objectives.
Let’s say you have a will that states you want all your assets divided equally between your son and daughter.  But if you die with your son’s name on your account, his “rights-of-survivorship” will cause the entire account to go to him.  He will essentially receive an additional inheritance.   

Your grandchildren could lose college aid.
If your children have college-aged kids, a joint account could actually hurt their ability to get student aid or scholarships.  This is because the money in your account will inflate their parent’s assets.   

Your money could go to your child’s heirs.
Most parents assume they will be the one to die first.  But what if your child pre-deceases you? Some of those funds would be considered part of your child’s estate and would therefore be distributed to others under the terms of his will or under the state’s intestacy statute.  

A legal judgment could empty your account.
Let’s say your child accidentally rear-ended someone and became part of a lawsuit.  Any claims and judgments involving money against your child could reach to your account and drain the entire balance.  

Your child could lose eligibility for public benefits.
Perhaps it’s not an issue now—but it could be.  What if the day came that your child really could use either temporary or permanent public assistance? . . . Medicaid, for example.  By having his name on your account, your assets would be considered available resources in determining his eligibility for public benefits.  He could be disqualified.  

Ummm. . . . he could take all your money.
Parents never think this will happen.  But it has.  And it does.  It often occurs when a parent becomes incapacitated and is not likely to discover any wrongdoing.  Frequently, a child will begin taking money in small amounts--maybe to buy a few groceries, or make a utilities payment.  If the child is helping to care for the parent, it is easy to justify taking a little money here or there.  But this can ultimately snowball out of control, until, in the end, much of the account, (or even the entire account) is depleted.   

Don’t unwittingly create problems for yourself or your children.  Think twice before adding a child’s name to a bank account.  Talk to an attorney or financial advisor to explore safer alternatives, like a power of attorney or a revocable living trust.