“Convenience Accounts”: What Are the Risks?

Some people realize that as they get older they may need some help with their finances. Perhaps they want someone they trust to have the ability to pay their bills if something comes up like an extended hospital stay. So, they add the trusted person’s name to their bank account, creating what some people call “convenience accounts.”

But is this really a wise move? In many case, by adding a person’s name to your bank account, you are making that person a joint owner of your account. That means that the person now has all of the rights and privileges you have with that account. The person could withdraw money, and even add another name to the account.

You may think, “Well, I trust this person. She won’t try to steal from me.” But, that is not really the problem. The problem is with the creditors of your new joint-owner.

For example, let’s say your trusted person gets into a car accident. A lawsuit ensues, and your trusted person is found liable. If she does not have enough insurance or assets of her own, the plaintiff from that lawsuit now has every right to attach your bank account to satisfy the judgment.

Adding a person as a joint owner of your bank account simply opens your money up to additional risk. The same goal can be achieved with a very inexpensive document that also avoids the additional risk. That is the power of attorney.

Through a properly drafted power of attorney you appoint a trusted person to be your agent. Your agent can do everything you have the legal right to do, such as draw checks on your checking account. However, all of your assets remain yours, and do not become the joint assets of your agent. This means that your assets can not be used to satisfy the debts of your agent.

Your lawyer can help you create a power of attorney that is right for you, creating powers for your agent that are as broad or as narrow as you want. You should also consult with your bank, as many banks either have their own power of attorney form or their own rules for appointing a power of attorney. A power of attorney can be an important part of your estate planning package.