One way that families engage in informal estate planning is by making a child a co-owner of a bank account. As a co-owner of the bank account, the child can write checks on behalf of his or her parent(s). However, there are many reasons why it is not a good idea to make a child a co-owner of your bank account. First, the child can use the funds in the bank account for his or her own benefit. Secondly, the funds in the bank account can be garnished by the child’s creditors. Thirdly and most importantly, the balance of the funds in the jointly owned bank account will not be distributed pursuant to the parent’s Will. Instead, the balance of the funds in the jointly owned bank account will automatically become the property of the child when the parent dies. Such a distribution of assets by operation of law is problematic when there are one or more siblings, who otherwise would have inherited the bank account in equal shares.
If you want your child to have access to your bank account to pay your bills, I highly recommend that you exercise a special power of attorney to make your child a “convenience person”. Maryland Financial Institution Code § 1-204(a)(5) allows an owner of a bank account to name a “convenience person” to act on his or her behalf by executing a special power of attorney. The “convenience person” does not become a co-owner of the funds in the account. Instead, the “convenience person” only has authority to withdraw funds from the account for the benefit of the owner. Stanley v. Stanley, 175 Md.App. 256, 265 (2007) (observing that the right of withdrawal does not necessarily create an ownership interest in the funds withdrawn).
Most banks in Maryland can provide you with a Special Power of Attorney Form. If the bank is unwilling to provide such a form, you can have an attorney draft the legal document for you.
For more information about the risk of adding a child to your bank account and the benefits of naming a “convenience person” to write checks on your behalf, see the brochure titled “What Account is Right for You” published by the Maryland Commission of Financial Regulation at https://www.dllr.state.md.us/finance/consumers/finregacctforyou.pdf
