I’m living with an 83-year-old man and we decided to put my name on his bank account in case he is hospitalized or dies and someone needs to pay bills. He has no close family. I don’t want to place myself in a position of liability. My intention is to legally and openly be able to manage his affairs in the event of a serious health event.
An acquaintance told me that if he were in a car accident, and I’m on his bank account, I might be named in a lawsuit. Is this true?
The Friend
Dear Friend,
The advice from your unnamed source was well-intentioned, but, for the most part, they are misinformed. This can happen when we reveal too much about our affairs to third parties. Everyone has an opinion — a doctor might give you investing advice, a hairdresser could give you a vacation recommendation — that doesn’t mean they have an expertise in that area.
Perhaps this acquaintance misunderstood the nature of your financial relationship with this friend: If you shared a joint bank account and deposited your own money into this account, those funds could indeed be targeted by an aggrieved party in a personal-injury lawsuit. Given this is all his money, your friend is effectively the one who is taking that risk.
Given this is all his money, your friend is effectively the one who is taking that risk.
Some people — friends or neighbors – might take advantage of a situation like this. This reader’s grandmother gave her neighbor $6,000 to buy a car. You don’t want to be in a position where relatives/heirs are accusing you of exploiting your friend’s vulnerability when they start asking questions like why his tenant/friend inherited his bank accounts.
If your friend died without a will, intestate succession laws in your state would take precedence. The probate court would appoint an administrator whose job it would be to locate any legitimate heirs. The order of succession usually goes in the following order: surviving spouse, children, parents, siblings, and others including nieces/nephews, aunts/uncles and cousins.
Reviewing his estate plan
But it has raised other questions for you regarding your friend and putting your name on your friend’s bank account. You should be a co-signer, someone who has the power to pay bills on behalf of the owner, and not a co-owner of the account. The latter would mean you would be on the hook if the account were to be in arrears and, yes, inherit the funds when he passed away.
In addition to paying bills, your friend may eventually wish to put in place an estate plan — appoint an administrator/executor of his estate and, to your point, give a trusted friend or professional (elder-care attorney, for example) a durable power of attorney document to oversee his financial and medical decisions if/when they arise.
If your friend died without a will, intestate succession laws in your state would take precedence.
Who will manage his affairs if he becomes incapacitated? Does he have a “do not resuscitate” order, a directive written by a healthcare provider to instruct doctors not to perform CPR or other life-sustaining measures in the event that his heart or breathing stops? If no such order exists, hospital staff will automatically initiate all life-saving measures.
While both are legally binding, there is also a difference between a “do not resuscitate” directive and an advanced healthcare directive. The former is specific to end-of-life sustaining decisions, while the latter is a more far-reaching document overseeing a range of decisions like appointing a healthcare agent, deciding on hospital choices and even nursing homes.
Durable power of attorney
“We live our lives and don’t realize the necessity of a durable power of attorney until we start noticing that the person we admired our whole life is struggling,” according to Sedita, Campisano & Campisano, a law firm based in Fairfield, N.J. “It could be a partner, elder parent or senior family member who forgot to pay the bills for a second month.”
“Many people think an estate plan is the same as drawing up a last will and testament,” it adds. “A will is only one part of the estate planning process. The other documents in the estate plan dictate who should make decisions on your behalf while you are still living but incapacitated for various reasons. It includes a healthcare POA or ‘living will’ and a durable power of attorney.”
Use this moment as an opportunity to take a holistic look at his estate plan.
You’re not the only one who is confused about giving access to bank accounts. Chad A. Ritchie, an attorney in Bloomington, Ill., says this issue comes up a lot. “Whenever I meet with a client for the first time, we usually will talk about how their bank accounts are owned and who has access to the client’s bank accounts both during their lifetime and upon their passing. Many times, there is general confusion as to how bank accounts are owned — either jointly or individually — and whether bank accounts have named beneficiaries or not.”
Ultimately, you want to make sure no one is on the hook for the other person’s activities, whether they’re bad debts or the result of an accident involving a third party, and whether your friend wishes to add someone as a beneficiary to inherit his account he’s gone. Use this moment as an opportunity to take a holistic look at his estate plan. If he does not have any family, perhaps he has favorite charities to which he would like to leave at least part of his estate.
Don’t miss: My father-in-law has dementia and is moving in with us. Can we invoice him for a caregiver?
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.
The Moneyist regrets he cannot reply to questions individually.
Previous columns by Quentin Fottrell:
Check out the Moneyist private Facebook group, where members help answer life’s thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.
By emailing your questions to the Moneyist or posting your dilemmas on the Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.
By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
This post was originally published on Market Watch
