Many Michigan parents consider adding a child as a joint owner on their bank account to make managing finances easier. While this may seem like a practical solution, it can lead to unintended legal consequences that could disrupt your estate plan and create conflict among your heirs.
Presumption of Ownership to the Survivor
Under Michigan law, when a parent adds a child as a joint owner on a bank account, the law generally presumes that the account passes to the surviving joint owner upon the parent’s death. This means that even if the parent’s estate plan (such as a will or trust) states that all children should inherit equally, the joint owner child may legally inherit the entire account.
Michigan courts have consistently upheld this presumption unless there is clear and convincing evidence that the parent intended the account to be distributed differently. This can be a high bar to meet, often leading to costly litigation among family members.
Potential Problems for Your Estate Plan
- Unintended Disinheritance – If a parent intends for all children to share equally in their assets, adding one child as a joint owner can undermine this goal. The account may pass directly to the joint owner child, bypassing probate and the parent’s estate plan.
- Increased Risk of Disputes – Other heirs may feel unfairly excluded and may challenge the transfer in court. This can lead to costly and emotionally draining litigation.
- Exposure to the Child’s Liabilities – As a joint owner, the child’s creditors could make claims against the account. If the child has financial troubles, the parent’s money could be at risk.
- Potential Loss of Control – Once a child is added as a joint owner, they generally have full access to the account. This means they could withdraw funds without the parent’s permission, intentionally or unintentionally jeopardizing the parent’s financial security.
Better Alternatives
Instead of adding a child as a joint owner, Michigan residents can consider these safer options:
- Financial Power of Attorney (POA): This allows a child to help manage finances without becoming an owner of the account.
- Payable-on-Death (POD) Designation: This allows funds to pass to designated beneficiaries without going through probate, while ensuring the account remains under the parent’s control during their lifetime.
- Revocable Living Trust: A trust can provide clear instructions for distributing assets and avoid probate without the risks of joint ownership.
Final Thoughts
Adding a child as a joint owner on a bank account may seem like a simple solution, but under Michigan law, it can have serious consequences. Before making this decision, it’s best to consult with an experienced estate planning attorney to explore alternatives that protect both your wishes and your family’s harmony.
