Joint accounts and added signers — the legal reality of shared finances

This article is for educational purposes only and does not constitute medical, legal, or financial advice. Every family situation is different, and you should consult with appropriate professionals about your specific circumstances.

Your mother suggests adding you to her checking account. It seems simple enough. You're going to help pay her bills anyway, so why not make it easier? Your brother thinks it's unnecessary and that you should get a power of attorney instead. Your aunt added herself to your grandmother's account years ago and now nobody knows what the money is actually for. These situations feel like they should have straightforward answers, but the legal reality of joint accounts is far more complicated than it appears.

The temptation to make accounts joint is real. It seems practical. It avoids paperwork. It feels like a solution that doesn't require formal legal documents or lawyers or any of the friction of more structured approaches. And in some cases, joint accounts do work out fine. But they also create legal complexity, tax consequences, and sometimes disasters that nobody anticipated. Understanding what you're actually doing when you add someone to an account is the first step toward making a good decision.

The challenge is that joint accounts mean different things in different states, they trigger different rules depending on whether we're talking about checking, savings, or investment accounts, and they can have unexpected consequences after someone dies. What looks like a simple way to help your parent manage money might actually be creating liability for you, changing what happens to the money when your parent dies, or leaving everyone confused about who owns what. Your mother might think she's making sure you can help. You might think you're preparing to manage her finances. The bank might think something else entirely.

This isn't to say joint accounts are always wrong. For some families in some situations, they make perfect sense. But they deserve more careful thought than they usually get. Before you add someone to an account or agree to be added to one, you need to understand what you're actually doing, what the legal consequences are, and whether it's really the best approach to accomplish what you're trying to accomplish.

Why This Document Matters

Let's start with understanding what legal authority actually is and how it works. When your parent can no longer manage their own finances, they need someone who has the legal right to act on their behalf. That authority has to come from somewhere. It comes from being a joint owner on the account, or from having a power of attorney, or from being appointed by the court as a conservator or guardian.

A power of attorney is a legal document that your parent signs while they still have capacity. It explicitly says: "I give this person the authority to manage these specific aspects of my finances." It's clear, it's limited to what the document says, and it can be revoked. It's also created specifically to give you authority to act on your parent's behalf.

A joint account, by contrast, doesn't explicitly say anything. It's simply a bank account with two names on it. But that joint ownership means something legal. It means both people own the money in the account. Both people can access it. Both people can move it. Both people's creditors can potentially reach it. Both people may have to deal with tax consequences. And when one person dies, the law determines what happens to the money based on how the account was titled and what state you're in.

Here's where the confusion starts. Your parent might think that adding you to an account is just giving you access to help pay bills. They might not realize that you also own the money. They might not realize that if you die first, they can't necessarily get that money back into an account in their sole name without your involvement. They might not realize that the account might not go to your siblings the way they expected it to after they die. And you might not realize that creditors of yours could potentially reach money in a joint account, or that you might be liable for taxes on the growth in the account.

This is why a power of attorney is often preferable. With a power of attorney, there's no ambiguity about what's happening. The document spells out exactly what authority you have. It spells out whether it takes effect immediately or only if your parent becomes incapacitated. It spells out what happens if you're not able to serve. It spells out whether you can be paid for your work. There's a clear paper trail showing what your parent intended. And it doesn't change ownership of the accounts. Your parent remains the sole owner. You're simply authorized to act on their behalf.

But power of attorney isn't always the solution, particularly if your parent lacks the capacity to sign one or is unwilling to sign one. In those cases, joint accounts might be what's available. Or you might need to pursue a conservatorship, which is a court process that gives you legal authority but is more time-consuming and expensive. Understanding the options, and the consequences of each, is what this section is about.

What It Actually Does

When you add someone to a bank account, you're making them a joint owner. Joint ownership means several things legally, and they're not all obvious.

First, both joint owners can access and control the account. Both can make deposits. Both can make withdrawals. Both can write checks. Both can transfer money. Neither joint owner needs permission from the other to do these things. This is why the account seems like a solution for helping manage bills. You can both access the account and act independently.

Second, joint ownership means both owners own the money. This isn't the same as one person owning the money and giving another person access. If you put money into a joint account, that money is owned jointly. If your parent has been putting money into the account all along, that money is owned jointly too. From a legal perspective, the money doesn't belong to "your parent's money that you happen to have access to." It belongs to both of you equally.

Third, the money in a joint account is exposed to each joint owner's creditors. If you have debts—credit card debt, an unpaid judgment, student loans, whatever—your creditors could potentially pursue the money in the joint account you share with your parent. This is a real risk, though how likely it is depends on your state's laws. It's also a surprising one to most people. They think they're just helping with bills. They don't think about the possibility that their own financial problems could threaten their parent's money.

Fourth, joint accounts have tax consequences that most people don't anticipate. If the account earns interest, dividends, or investment gains, that income gets reported on a tax return. If you're jointly named but your parent contributed all the money and you're just the helper, the tax situation gets murky. You might have income that you didn't contribute to. Your parent might not have income that they contributed to. The tax law on this is state-dependent and complicated. Many joint accounts are incorrectly set up from a tax perspective.

Fifth, and most importantly for long-term planning, what happens to the money when your parent dies depends on how the account was titled and what your state law says. Most joint accounts are set up with survivorship rights, meaning that when one owner dies, the money automatically goes to the surviving owner. So if your parent dies, the account goes to you. It doesn't go through probate. It doesn't go to the other heirs. It just goes to you. This might be what your parent wants. Or they might think the account is just a practical tool for paying bills, and they expect you to use it to pay their debts and then distribute the remainder to all their heirs. If they think that and the account has survivorship, you're in a difficult position. The money is legally yours, but your parent expected you to share it.

Not all joint accounts have survivorship rights. In some states, the default is tenancy in common, which means the account doesn't automatically go to the survivor. Or in some cases, if your parent can show they contributed all the money, the courts will decide that they retained ownership and the account goes into their estate. But these rules vary by state and by how the account was titled. The only way to be sure is to understand your specific state's laws and how the account is actually titled at the bank.

Getting It Done

If you and your parent decide that a joint account is the right approach, here's what you need to know about setting it up.

First, this requires your parent to have legal capacity and to be willing. Your parent needs to understand that they're adding you to the account and what that means. They need to willingly agree to it. If your parent already lacks the ability to understand and consent to this, you can't create a joint account through normal banking channels. You'd need a court order, and at that point, you might as well pursue a conservatorship or guardianship, which gives you more complete authority anyway.

Second, the account needs to be set up properly through the bank. This means going to the bank together with your parent, bringing identification, and explicitly requesting a joint account. The bank will have you sign documents. Read them carefully. Ask what type of account is being set up. Ask whether it has survivorship rights. Ask what happens if one person dies or becomes incapacitated. Ask how the bank will handle disputes between the owners. Get everything in writing. Different banks have different procedures, and different states have different laws, so the specifics matter.

Third, consider whether you want to use a formal document to clarify your intentions even though you're using a joint account. Some families create a side agreement specifying that the joint account is intended only to help pay bills, that the money remains your parent's property, that you're not entitled to any of it, and that any balance remaining should go to all heirs or to the estate. This doesn't change the legal reality of the joint account, but it creates evidence of what your parent intended. If questions come up later, there's documentation. This isn't guaranteed to protect you or clarify things, but it's better than nothing.

Fourth, understand the limitations. A joint account gives you authority to access and manage the money in that specific account. It doesn't give you authority over investment accounts, retirement accounts, real estate, or any of your parent's other assets. If your parent has a broader financial situation and you need broader authority, a joint account isn't enough. You'd need additional documents for other accounts and assets, or you'd need a power of attorney that covers everything.

Using It Properly

Once the account is set up, there are practical things to understand about how to use it responsibly.

First, keep records. Document what the account is being used for. Keep a simple log of deposits and withdrawals if possible. This creates a record that the money was used for legitimate purposes and wasn't misappropriated. If questions come up later, you have evidence.

Second, understand that you're not a financial advisor to your parent. Your role is to help manage the account, not to make investment decisions or control your parent's money beyond what's necessary to help with their care. If your parent wants to move money out of the account or make investments or take money out for a purpose you think is unwise, that's technically their choice. Your job is to help them manage what they've explicitly asked you to manage, not to control their finances.

Third, be clear with other family members about what's happening. If your siblings don't know that you have a joint account with your parent, and then your parent dies, there will be confusion and probably hurt feelings. Let people know what's happening and why. Be transparent about it. If your parent wants it private, that's a problem. It suggests they understand that they're doing something that will upset people, which should raise a red flag.

Fourth, when your parent dies, understand what happens next. If the account has survivorship rights and your parent dies, the account automatically becomes yours. You don't need to do anything through probate. You just need to notify the bank of the death and provide a death certificate. After that, the money is yours. But then you need to figure out what to do with it. Do you distribute it to heirs? Keep it to pay debts? This is where having clarity about what your parent intended matters. And it's where family conflict often starts if people have different ideas about what should happen.

The practical reality is that joint accounts are useful in some situations and complicated in others. If you use one, go in with your eyes open about what you're actually doing and what the consequences might be. The conversation between you and your parent about the account, and ideally with your whole family, should happen before the account is set up, not after someone dies.

How To Help Your Elders is an educational resource. We do not provide medical, legal, or financial advice. The information in this article is general in nature and may not apply to your specific situation. If you are concerned about a loved one's cognitive health or safety, consult with their healthcare provider or contact your local Area Agency on Aging for guidance and support.

How To Help Your Elders is an educational resource. We do not provide medical, legal, or financial advice. The information in this article is general in nature and may not apply to your specific situation.