Author Archives: genecmda

Why is it not a good idea for adult children to put their names on their parents’ bank accounts?

It is fairly common for an aging parent to add a child’s name (sometimes more than one child) as a joint owner on the parent’s bank accounts.  The arrangement is usually viewed as a simple and inexpensive solution to the following concerns:

  • Someone needs to be able to pay bills when the parent is ill or hospitalized;
  • Funerals are expensive and money will be needed immediately;
  • The account will otherwise go to probate upon the parent’s death;
  • Probate is expensive and time consuming; and
  • Estate planning involves costly attorneys and fancy legal documents.

Many people are not aware of the hidden problems and risks that come with this arrangement.  What seems like a practical and inexpensive solution may actually create financial complications and ignite family conflicts.   Here are some reasons NOT to add a child’s name to a bank account:

  1. Loss of control – Adding a joint owner means the parent loses sole control of the account. Some parents are shocked to discover they are unable to remove the child’s name from the account without the child’s consent. This is a problem if the relationship sours or the child uses the money in a way the parent doesn’t like.
  2. Invitation to child’s creditors – Adding a child to an account gives the child ownership, not just access. Because the child has ownership, anyone to whom the child owes money (IRS, divorcing spouses, judgement creditors, and more) may be able to claim the funds in the account.
  3. No backup plan – If the joint owner child is ill or dies before the parent, there is no one else authorized to access the account. And adding more names to the account is not a wise decision for all the other reasons discussed.
  4. Accidental disinheritance – The trusted child may be expected to share the money with other family members according to the parent’s wishes after the parent’s death. If the parent’s wishes are not expressed in a will, then the child may claim the account and not follow those instructions.  Also, if the child dies shortly after the parent, then the account will pass to the child, become part of the child’s personal estate, and then be distributed to the child’s own family.
  5. Ignites family feuds – Other children and family members usually look suspiciously at the child who is joint on an account with the parent. There may be suspicions the child used the money personally, moved money to other accounts, or did not accurately report how much was in the account.  This may lead to fights in court or broken family relationships.

Fortunately, there are alternatives to joint ownership.  Many of the aging parent’s concerns can be solved with carefully designed powers of attorney (POAs).  These allow a trusted child to access the account without the risks that come with joint ownership.  Also, POAs identify alternates to replace the child and may require accountability and restrict what the child can do with the money.  Transfer on death designations can be used to make sure an account is distributed appropriately to other family members.   A revocable trust may also be a useful tool. An estate planning attorney should be consulted about which of these tools are best for the aging parent’s situation.  Most estate planners are reasonably priced and may well save the family from expensive legal fights in the future.

 

Gene Richards_8x10@300Norman E. Richards (Gene) is an attorney at the law firm of Cummings, McClorey, Davis & Acho, P.L.C. where he focuses his practice on estate planning and elder law.  He assists clients with the development of customized estate plans to address their specific needs, including family owned businesses, senior adults concerned about long term care needs, and special needs trusts for children with special needs.  He may be reached at (734) 261-2400 or nrichards@cmda-law.com.

College Bound? Two Documents Every College Student Should Sign

Gene Richards_8x10@300Most parents know — in theory, at least — that their children are no longer children when they turn 18. They are considered legal adults with legal responsibilities. This is an abrupt transfer of power and the full significance may not be apparent until something happens that drives that reality home.

The start of the school year is right around the corner, which means many recent high school graduates will soon be heading off to college. Before parents drop off their children on campus, I strongly recommend having them obtain a medical durable power of attorney and a general durable power of attorney.

Medical Durable Power of Attorney
The following is a difficult sentence for many parents to digest: Just because you are the parent, and just because you provide the financial support, does not mean you have any legal rights for your son or daughter after they turn 18 years old- even if you are paying their college tuition, and even if they are on your health insurance plan, and even if you claim them as a dependent on your tax returns. If your son or daughter gets into a car accident the day after they turn 18 and suffers severe brain damage, without a medical durable power of attorney, you have no rights to sign them up for benefits and you could even be kept in the dark on their medical condition.

I recommend having college-aged young adults, along with young adults who are still dependents, sign a medical durable power of attorney. This document allows a parent to be designated as a patient advocate to make future medical decisions in the event that their son or daughter is unable to make medical decisions on their own.

General Durable Power of Attorney
Another legal document that I recommend having college-aged young adults obtain is a general durable power of attorney. This document goes above and beyond medical decisions and gives a parent – or another trusted adult – the authority to make financial decisions, business decisions, and conduct transactions on behalf of their son or daughter in the event some sort of accident leaves them unable to handle their own affairs. It could be dealing with the bank or even with the university they attend. Having a general durable power of attorney allows a trusted adult to step in without getting judges, courts, and lawyers involved.

We’ve Streamlined the Process for Busy Families
Having college-aged children myself, I know preparing for college life is very hectic for both parents and their children, therefore I have implemented a streamlined process for young adults to quickly obtain these important legal documents before they head off to school. After a brief phone consultation, the parent and their child will come into our Livonia office where I will explain the legal significance of both documents in clear and straightforward language to ensure all family members understand the legal rights a parent has – and does not have – once these documents are signed. Both the young adult and the parent will then be asked to sign the documents. While I will spend as much time as needed, most appointments take less than 30 minutes. There is still time to get this done before school starts, even for those with nearly full calendars.

Special Pricing: Two Offers
Offer #1: If you have a child heading off to college or an adult child who is still a dependent, I will prepare a complimentary medical durable power of attorney or a general durable power of attorney for every client that schedules an appointment to have their current estate plan reviewed. Keep in mind, if your child was a minor when you first created your estate plan and he/she is now over 18 years old, it is wise to review and update your estate plan.

Offer #2: If you are not in need of an estate plan review at this time, but have a child heading off to college or a young adult who is still a dependent, I am offering special “back to school” pricing to prepare these documents. The cost to obtain a medical durable power of attorney is $75/per child. The cost for a durable power of attorney is $100/per child. The cost to get both documents at the same time is $150/per child.

Taking the simple steps to obtain these important legal documents before your child heads off to college will provide parents with an overall peace of mind and, should an accident occur, eliminate the stress and confusion when your son or daughter needs you the most.

The two special offers are only valid through September 31, 2018. Please contact Norman (Gene) Richards or his legal assistant, Rita Turner, to schedule an appointment. They may be reached at (734) 261-2400 or by email at nrichards@cmda-law.com or rturner@cmda-law.com. Gene is available to meet throughout the day and on select evenings.

Norman E. Richards (Gene) is a partner in our Livonia office where he focuses his practice on estate planning and elder law. He assists clients with the development of customized estate plans to address their specific needs, including family owned businesses, senior adults concerned about long term care needs, and special needs trusts for children with special needs. He may be reached at (734) 261-2400 or nrichards@cmda-law.com.

Gene Richards Featured on “The Lawyers” Radio Program

Radio Show PhotoCurt Benson, an attorney in our Grand Rapids office, hosts a popular syndicated radio program, The Lawyers, which airs on Newsradio WOOD 1300 and 106.9 FM.  On the program, Mr. Benson interviews professors, judges, lawyers and lawmakers on legal issues in the news. He recently sat down with Gene Richards, a partner in our Livonia office, to discuss a variety of estate planning and elder law issues, legal updates, and cost-effective solutions.  Please click here to listen to the informative radio program.

Mr. Richards helps clients safely navigate life’s transitions through the skillful, practical, and compassionate application of comprehensive elder law and estate planning services.  He guides senior clients in planning for their future care needs, including maximizing financial resources to pay for the cost of long-term care. He takes the time to understand his clients’ needs and goals and designs practical, customized solutions for them.

Gene Richards may be reached at (734) 261-2400 or nrichards@cmda-law.com.

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