Do You Need a POA If You Have a Joint Account?
A person with Power of Attorney for their parents can’t actually “add” the POA to their bank accounts. However, they may change bank accounts to be jointly owned. There are some pros and cons of doing this, as discussed in the article “POAs vs. joint ownership” from NWI.com. (Note: In Louisiana, a Power of Attorney is called a “Mandate”, but for purposes of this article I will use the term Power of Attorney or POA for simplicity).
The POA permits the agent to access their parent’s bank accounts, make deposits and write checks. However, it doesn’t create any ownership interest in the bank accounts. It allows access and signing authority.
If the person’s parent wants to add them to the account, they become a joint owner of the account. When this happens, the person has the same authority as the parent, accessing the account and making deposits and withdrawals.
However, there are downsides. Once the person is added to the account as a joint owner, their relationship changes. As a POA, they are a fiduciary, which means they have a legally enforceable responsibility to put their parent’s benefits above their own.
As an owner, they can treat the accounts as if they were their own and there’s no requirement to be held to a higher standard of financial care. Keep in mind that when it comes to qualifying for Medicaid Long Term Care, Medicaid will still regard the account as 100% owned by the original owner. So just adding a child to an account cannot be considered long term care planning or Medicaid planning.
Because the POA does not create an ownership interest in the account, when the owner dies, the account passes to the surviving joint owners or the heirs or legatees of the parent under the parent’s last will and testament.
If the account is owned jointly, when one of the joint owners dies, the other person becomes the sole owner.
Another issue to consider is that becoming a joint owner means the account could be vulnerable to creditors for all owners. If the adult child has any debt issues, the parent’s account could be attached by creditors, before or after their passing.
Most estate planning attorneys recommend the use of a POA rather than adding an owner to a joint account. If the intent of the owners is to give the child the proceeds of the bank account, they can name the child a POD on the account for when they pass and use a POA, so the child can access the account while they are living. However, due to the pecularities of the Louisiana POD law, any intent to name the child as the POD, the payee on death, should also be clearly spelled out in the parent’s last will and testament in Louisiana.
One last point: while the parent is still living, the child should contact the bank and provide them with a copy of the POA. This, allows the bank to enter the POA into the system and add the child as a signatory on the account. If there are any issues, they are best resolved before while the parent is still living.
Be sure to check out these articles addressing powers of attorney and PODs on bank accounts: What Is a POD Account? A litigation time bomb. and Appointed Power of Attorney? and What is the Difference between a Trust and a Will? and What Do Elder Law Attorneys Do?
Reference: NWI.com (Aug. 15, 2021) “POAs vs. joint ownership”