I recently learned of a difficult situation that highlights a common mistake that many make in estate planning. For the sake of privacy, let’s call my client Margaret and her two adult children Alex and Emily.
Margaret has had dementia for quite awhile. She fortunately had the foresight to execute a Power of Attorney (POA) naming Emily to handle her finances. With the Power of Attorney, Emily was allowed not only allowed to manage her mother’s finances but ensure her needs were met by covering the cost of a memory care facility and other necessary expenses.
Unfortunately, Margaret made a decision that would prove to be costly. Both Alex and Emily were listed as joint owners on her investment accounts. No child had contributed to these accounts financially.
Before her dementia worsened, Alex asked his money for money and she often gave it to him. As Margaret’s condition worsened and the POA was executed, Emily was legally and ethically obligted to Margaret’s funds solely for her care, not to make gifts to family members or children.
Here’s where things get messy: joint ownership changes everything. Because Alex was a co-owner on the account, he had legal access. Alex decided to take matters into his own hands withdrew over $100,000 from his mother’s account. Legally, there was little that Emily could do to stop him.
To make it worse, Margaret’s Last Will and Testament directs that her remaining assets be divided equally between her children. If things remain unchanged, Alex would stand to receive an additionall $100,000 over his sister.
We see this scenario more often than most families would like to admit. Most client are confident that their children would not behave this way. Thankfully, many are right and there are countless examples of families working together seamlessly.
But then there are cases like Margaret’s, where the signs have long been there: one child in chronic financial distress, always in need, always asking. When you give someone like that unrestricted access to your assets by naming them a joint account holder, you give them the power to do real damage.
This isn’t just about family dynamics. Joint ownership also carries legal risks. What happens if that child gets divorced or passes away before you? Could your assets end up in the hands of an in-law or creditor while you’re still alive?
The bottom line is that if you want to protect yourself and ensure your assets are used according to your wishes, you need to make legally sound decisions about who has access to your finances. Joint ownership is rarely the best solution.
If you’re concerned about how to structure your estate plan, or if someone in your family has a history of financial instability, please reach out. We’re here to help you make the right choices, for today and for the future.