Something we see quite often with our older clients is a joint bank account – parent’s money, child added to the account for convenience of the parent. It really can be very convenient, so, despite the list of problems I’ll get to in a minute, for some families in some situations, adding a child to your bank account can be good.
However, as I’ve written before, it can also be bad. Adding a child as an owner of a bank account, from the IRS’ perspective, is a gift to that child and must, in some cases, be reported to the IRS. If your child is a co-owner of your bank account, your child’s creditors are entitled to access that account to satisfy your child’s obligation to them. And, really bad, on your death, the joint owner becomes the sole owner. This can cause some uncomfortable Thanksgiving dinners if you have more than one child.
Finally, the ugly. If a co-owner applies for Medi-Cal, that joint account will be treated as 100% owned by the Medi-Cal applicant absent “clear and convincing” evidence to the contrary. Yes, even if the money in the account is actually 0% owned by the Medi-Cal applicant. This is not what most of us would consider the normal order of things – parent and child on a joint account and child is the one applying for Medi-Cal, but it happens.
When we submit a Medi-Cal application on behalf of one of our clients we really want it to be crystal clear that our client is eligible for Medi-Cal. If there are questions or some reason why the case worker might be inclined to deny the application that makes us worry that processing time might be long. Every month of delay costs our clients $10,000 to $20,000 in nursing home expenses. When we have to submit an application that depends on convincing the case worker that an account in our client’s name actually is not her money, we are taking a risk. It’s not a sure thing.
Bottom line: adding someone as a co-owner on one of your accounts has lots of potential legal consequences so talk to your attorney before you do it.