My Name is on Mom’s Checking Account (Part 1)

It’s an issue I deal with frequently as an elder law attorney.  Melissa tells me she has been handling Mom’s finances for several years.  She writes checks from Mom’s checking account and transfers funds from Mom’s other accounts, as needed, to pay the bills.  She says she does it because she has power of attorney.  Upon further inquiry I learn she is actually co-owner on the account.  Does that matter?   Is there a difference?

 Yes, it matters and yes there is a difference.  Let’s look first at the difference.  A power of attorney is a document in which the principal designates an agent to act on the principal’s behalf.  A financial power of attorney will typically give the agent the power to conduct financial transactions, such as pay bills, access bank and investment accounts, conduct real estate transactions, pay taxes, etc.  It can be as all-encompassing or limiting as the principal wishes.

 With respect to bank accounts, the power of attorney will give the agent the ability to write checks on the prinicipal’s behalf.  The agent will sign his/her name followed by the initials “POA” .  If Melissa is Mom’s agent, then she is acting in a fiduciary capacity and must act in Mom’s best interest.  The assets in that account are still owned by Mom.  However, if Melissa is a co-owner of the account, then those assets become hers or, in some cases, one-half of the assets become hers.

 It is very easy to misunderstand the difference and in many cases we have found that people are under the impression they have set up a POA situation when in fact they have made their “agent” a co-owner.  A careful review of a monthly bank statement can reveal the answer.   If Melissa is an agent under power of attorney, her name would not appear on the bank statement or it would appear with the initials “POA” after it.  She produced a recent statement and it listed Mom and Melissa’s names but no “POA”.  A call to the bank confirmed that Melissa is a co-owner of the account.

 Now that we understand the difference, let’s go back to my first question, “Does it matter?”  We’ll delve into that next week.

4 Responses so far.

  1. Mike Smith says:

    Yale:

    You are making an important point in your post. We see clients all the time who think co-ownership of an account is a great way to plan for the future. One of the problems (in addition to the obvious Medicaid and Veterans’ Aid and Attendance asset issues) we have seen is that Melissa’s creditors become Mom’s creditors and that might lead to an unintended result where Mom loses her assets because of a lawsuit or financial issue that Melissa has.

    Mike

    • AmyWeiss says:

      Mike,
      I have a book that is filled with stories such as this blog post.
      The book can be found at benicetomebook.com or on amazon.com
      Be Nice To Me – I Pick Your Nursing Home by Yale Hauptman.
      Its a great tool.

      Yale

  2. M!elissa Polk says:

    Sounds a little familiar. Can’t wait to read next week’s issue. Sounds like I might be in that boat

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