The perceived reason people do this is a misunderstanding that upon the subsequent incapacitation of the parent, this technique would give their son/daughter immediate access to the parent’s funds for bill paying purposes, etc.
However, it is not recommended that parents do this since by adding their son/daughter as a co-owner or co-signer on their accounts, this makes those accounts immediately subject to their son/daughter’s creditors such as in the event of a divorce, unpaid taxes and other liabilities).
It is far better to hold all financial accounts in the name of the living trust and then just add the person’s son/daughter as a power of attorney holder in a durable power of attorney and as a co–trustee in their living trust. This way they are not deemed to be a legal owner of these accounts and the parent’s financial accounts are not subject to the liabilities of their son/daughter.
For more detailed information on the subject of giving family members access to financial accounts, read our other article entitled, “Careful Whom You Add to Accounts“.
