Allowing Access to Assets

I read a great article written by an elder law attorney on estate planning awhile back. If my parents had known the consequences of turning over their assets to our names, I believe they would have re-thought doing so. How many of you have added an adult child’s name to one of your bank accounts? You may want to read this.

You probably added a child’s name to a checking account or savings account, or your home/real estate, or all of your investments for emergencies or for “convenience” purposes. You, like many elders, fear that you will be suffer an accident or get sick and that someone has to be on your accounts in order to pay your bills. You believe that this arrangement will keep your life running smoothly.

What you might have done, instead, is just the opposite. You may have placed your money in jeopardy, created a tax liability or even given up control of your well-being. Like my parents, do what you want, but know the consequences of these choices. Consider the following when thinking of turning your assets over to someone.

When adding someone’s name to your real estate by deeding that person an interest, you are making a gift. Check with your state department of revenue for current gift tax exemption, you might owe a gift tax to your state's Department of Revenue. That payment could be due by the next April 15 following the year of the gift. Failure to pay the tax could result in the addition of interest and penalties. Far too many people transfer an interest in their real estate to their children hoping to save it from long-term-care expenses. What they have actually done is incur gift taxes, and possibly a Medicaid transfer penalty. So, check with an elder law attorney before making any transfers or name changes on your assets.

And if you add someone’s name to your money, you could be giving up control.
A true story: A man preparing for a senior event (in case life would throw one his way) added the names of his two adult children to his savings account. He grew older, suffered from physical infirmities, and his children wanted him to go into a nursing home. He didn’t want to go, saying that he would use his savings to pay for professional caregivers to come into his home.
The children contacted the bank and froze the account so he could not use the funds in the account. They could do that; they were co-owners on the account. Many months and a court hearing later, the children each received a third of the account, and the man was left with a third. He remained in his home, but he was estranged from his children.

So, what do you do? How do you give someone access to your money but not ownership? You sign a document called a Durable Power of Attorney for Financial Decisions. By appointing someone your agent in this document, you give that person access to your money to pay your bills and take care of any other financial business that you need. The key is, your agent doesn’t own your money. Could your agent act improperly and use your money in ways that you didn’t intend? Yes, but there are legal remedies available for that. Consider the consequences. Always, always, check with an Estate Planning Attorney or an Elder Law Attorney to know your options and what consequences they may bring.

If you have a quick Elder Law question or concern - Ask it here!! WorkingCaregiver Ask the Expert. Thank you, Carol