Why do estate planning attorneys not recommend naming a child as joint owner of a personal bank account?

1. Exposes the parent’s assets to the child’s creditors.  If the child is sued, the child must disclose the joint account to the court and plaintiff’s attorney.  The burden falls on the child to convince a court that the child contributed nothing and that the account really belongs to the parent.  Similarly, the account would be a reportable asset if the child filed for bankruptcy.
   
2. Eliminates the fiduciary duty a child would otherwise have.  A child as joint owner has no fiduciary duty to manage the account in the best interest of the parent.  By naming the child as agent or trustee, the fiduciary duty is maintained so that misuse of funds by the child remains a crime punishable by law.
   
3. Parent loses full control of the account.  Although intended to facilitate a child helping the parent, a controlling child or the jealousy of other siblings could spoil the arrangement.  Similarly, if the child needs money, there is nothing to prevent the child from taking it without permission. 
4. Assumes the child will behave like a Saint.  The parent can only hope the child “does the right thing” and uses the joint account to pay estate bills and then shares it with other beneficiaries as directed in the parent’s estate planning documents.  The child’s attorney would be correct under the law to counsel the child otherwise.
5. Creates potential eligibility penalties upon application for ALTCS.  The parent must report gifts made within the prior 5 years when applying for nursing home benefits through the ALTCS program (Arizona Long Term Care System- a component of Medicaid).  Naming a child as joint owner may be interpreted as a gift that triggers a penalty and delays the start of benefits.

If there is a legitimate reason to have a child assist a parent with management of a bank or investment account, the better alternatives to joint ownership are (1) Title account in parent's individual name and add child as agent under financial power of attorney, and (2) Title account in trust name and add child as co-Trustee.   The only time when I would recommend joint ownership between parent and child is when they are operating a business together.