Should You Add Your Child’s Name to Your Bank Account?

illustration of writing a check in a checkbook

Even if you wanted to have another party available to keep track of bills when you’re sick or away, adding a child’s name to a bank account may be more of a hassle than it’s worth. Doing so may have unintended consequences for both you and the child.

Risks of Adding a Child's Name to Your Account

Exposing the Account to Others

The money in your account could be diverted to unintended parties. As of 2021, if the account held anything over $15,000, you might have to notify the IRS by filing a gift tax return. If the child divorces, is in debt, or has a legal judgment against them, the account could become available to the ex-spouse, creditors, or plaintiffs--just because the child’s name is on it.

Changing Your Estate Plan

Putting someone’s name – particularly a potential beneficiary’s name, at that – may frustrate the intentions of your will. Because your child’s name is on your account, that person likely has rights of survivorship. This means that the entire account goes to that person on your death. If you wanted your assets divided equally among your children, for example, this would not happen with that account. Instead, by adding a child's name to your account, the distribution of your estate will be unequal.

Jeopardizing Public Benefits

If you add someone to a bank account, that person could lose eligibility for public funds. It's even possible that person's children--your grandchildren--could then lose the opportunity for scholarships and financial aid. If your child ever needs public assistance, such as Medicaid, the account will be counted as an available resource and may make them ineligible. Likewise regarding your grandchildren, they may not be able to get student aid if the account which their parent's name is on inflates their parent's assets.

Losing Those Fundscheck and fountain pen over white background

There are a few other potential consequences. If your child dies before you, then the money in the account (if held as tenants in common) could be part of their estate and would be distributed under the terms of their will, rather than yours. Or if your child spends the money in the account without your permission, because their name is on the account they would not be required to pay you back. Either way, the money in your account would have ended up out of your control.

Two people managing finances and discussing risk of adding your child's name to a bank accountA Better Approach to Adding a Child's Name to Your Account

Even though adding a child’s name to your bank account seems harmless, it can backfire. It often does by leading to consequences for both you and your child. The better approach is to use proper estate planning tools to allow someone else to help manage your finances and determine who will receive assets after your death. McCreary Law Office can help you find ways to protect your bank accounts during your lifetime, and pass money on to your children without the threat of creditors reaching that money.

Please contact McCreary Law Office or call the Jacksonville, FL office at 904-425-9046 or the Houston, TX office at 713-568-8600 to learn more.