{"id":13075,"date":"2025-03-09T06:00:24","date_gmt":"2025-03-09T11:00:24","guid":{"rendered":"https:\/\/legaltalktexas.hammerle.com\/?p=13075"},"modified":"2025-06-18T12:00:07","modified_gmt":"2025-06-18T17:00:07","slug":"think-again-about-adding-adult-child-as-co-owner-to-bank-account","status":"publish","type":"post","link":"https:\/\/hammerle.com\/legaltalk\/estate-planning\/think-again-about-adding-adult-child-as-co-owner-to-bank-account\/","title":{"rendered":"Why You Should Think Again About Adding Your Adult Child as a Co-Owner to Your Bank Account"},"content":{"rendered":"

Do you want to take a walk on the wild side?<\/span><\/p>\n

Just add your adult child as a co-owner to your bank account.<\/span><\/p>\n

Why Would You Add an Adult Child to Your Bank Account?<\/span><\/h2>\n

Suppose you live in Texas and you have two adult children: Jim and his younger brother, David. Jim has been helping you pay your bills and invest your money. You want him to have direct access to your bank account to make it easier for him to do that. You also want him to have money to pay for your funeral after you die.\u00a0<\/span><\/p>\n

You and Jim think that adding him as a co-owner to your bank account is the perfect solution. You do that, with the banker helpfully setting up the account as a \u201cjoint tenant with <\/span>right of survivorship<\/span><\/a> account.\u201d\u00a0<\/span><\/p>\n

Bankers are so helpful when they give legal advice, aren\u2019t they? Let\u2019s look at the result.<\/span><\/p>\n

Realities of a Joint Account With Your Adult Child<\/span><\/h2>\n

Filing a Gift Tax Return<\/span><\/h3>\n

Because it is set up as a \u201csurvivorship account,\u201d you just made a present <\/span>gift<\/span><\/a> to Jim. That may be fine if there was only $10,000 in the account, but if there was instead $50,000 then you probably need to check with your CPA about filing a gift tax return.<\/span><\/p>\n

Accidental Overdraft<\/span><\/h3>\n

Now suppose that you make an accounting error and accidentally overdraft the joint account. Who is on the hook for the overdraft? You and Jim. Jim will not be happy.<\/span><\/p>\n

Tax Implications<\/span><\/h3>\n

Let\u2019s forget about Jim\u2019s happiness and worry about yours. What happens if Jim forgets to pay his taxes, and the IRS places a lien on his accounts? The lien will include your joint account, of course.\u00a0\u00a0<\/span><\/p>\n

Divorce Impacts<\/span><\/h3>\n

Now suppose Jim gets a <\/span>divorce<\/span><\/a>. He will have to disclose that he is an owner of the joint account.\u00a0 Could the funds in the account be in jeopardy? Yes.<\/span><\/p>\n

You may be able to successfully fend off the IRS and Jim\u2019s horrid spouse, but it will cost you money and time. You will not be happy.<\/span><\/p>\n

Estate or Inheritance Tax<\/span><\/h3>\n

What if Jim dies before you do? You would receive the funds, but if Jim lives in another state, then his share of the account may be subject to an estate or inheritance tax imposed by that state.\u00a0<\/span><\/p>\n

Discrepancies in Inheritance<\/span><\/h3>\n

What if your funeral only costs $10,000, but there is $200,000 in the bank account when you die?\u00a0 Jim gets the entire amount. Your other son, David, has no claim to the funds. If Jim wants to give some of the money to David, then it is a gift and Jim\u2019s CPA will have something to say about that.<\/span><\/p>\n

Money Used Incorrectly<\/span><\/h3>\n

What if, after you die, Jim doesn\u2019t want to use any of the money in the bank account for your funeral? Well, legally the money is his. He does not have to spend it on your funeral.<\/span><\/p>\n

Right of Survivorship<\/span><\/h3>\n

What if you did not check the box on the account agreement for the right of survivorship? The Texas Supreme Court has an opinion right on point. If the only funds in the account came from you then, upon your death, Jim does not get ownership of the bank account.<\/span><\/p>\n

Alternatives to Adding an Adult Child to Your Bank Account<\/span><\/h2>\n

What is a good alternative to adding Jim as an account owner?\u00a0<\/span><\/p>\n