Money Matters with Ken Moraif

Should You Add your Kids to Your Bank Account?

Posted on . Category | Retirement Planning

Last week, one of my clients said, “I want to open a joint bank account with my daughter. That way, if I become incapacitated or have health issues or other problems, my daughter could step in and start paying my bills; take care of things.” I said, “Sure, you can do that, but let’s talk over the risks first, so you can make an informed decision.”

I’d like to explain those risks to you readers as well. You probably understand that whoever is on your account will have complete access to that money. Whoever is on that account could drain it at any time. But remember, by adding your child to your account, you’ve also exposed that money to any lawsuits, divorces, or bankruptcies—any kind of financial hardships your child may incur. If your daughter declares bankruptcy, her creditors may have access to that money. If your son gets divorced, his ex may have a claim on that money. Your child’s debt collectors may be able to gain access. It could even be your own child who taps into that account during an especially tough financial time.

Taxes can become another risk factor. When you put a child on a joint account, you are not gifting them the amount in the account. However, if the child ever writes a check from that account for his or her own benefit, that money becomes a gift. And if your child takes more than $14,000 out of that account, then you as the donor will owe gift taxes, which can run anywhere from 35 to 50 percent of the amount of the gift. In other words, if your son writes himself a $24,000 check, that $10,000 above the gift tax cap of $14,000 could cost you $3,500-$4,500 in taxes.

It may seem like a good idea to add your son or daughter to your bank account, but if you are considering it, I urge you to consider all the downsides, too, so you can make an informed decision.

  • All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Information presented does not involve the rendering of personalized investment advice. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client's investment portfolio. All investment strategies have the potential for profit or loss.
  • Photos, videos, and images on this website are not past or present clients of Money Matters. They should not be construed as an endorsement of the advisor by any client.
  • This website is a publication of Money Matters. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change.
  • Information on this website does not involve the rendering of personalized investment advice, but is limited to the dissemination of general information on products and services. A professional advisor should be consulted before implementing any of the options presented.
  • Information on this website is not an offer to buy or sell, or a solicitation of any offer to buy or sell the securities mentioned herein. Hyperlinks on this website are provided as a convenience and we disclaim any responsibility for information, services or products found on websites linked hereto.
  • Money Matters is registered as an investment advisor with the SEC and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the advisor has attained a particular level of skill or ability.
  • Investment Advisory Services offered through MMWKM Advisors, LLC. Investment advisor representatives of Money Matters may recommend the purchase of insurance-related products and may receive additional compensation for such transactions.
  • The tax and estate planning information provided is general in nature. It is provided for informational purposes only, and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.
  • Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that the future performance of any specific investment or investment strategy will be profitable or equal to past performance levels.
  • All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals may materially alter the performance of your portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client’s investment portfolio.
  • Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results.
  • Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark.
  • References to performance arise from investment management services provided by Money Matters with Ken Moraif. MMWKM is the independent advisory firm created after Money Matters with Ken Moraif left Cambridge Investment Research. The persons who manage accounts at MMWKM are the same investment advisor representatives with that responsibility at Money Matters with Ken Moraif. MMWKM accounts are being managed now using the same strategy as was utilized at Money Matters With Ken Moraif.
  • Ken Moraif has worked in the financial services industry since 1988. He has been a Certified Financial Planner Professional since 1998.
  • Prior to 2003, the advisor was not using the exit strategy on which these videos are based and clients at that time may have experienced different results. Therefore, results prior to that date should not be viewed as indicative of the advisor’s skill. This exit strategy is currently being used with MMWKM’s existing clients’ accounts. Backtesting was used in creating illustrations prior to 2003. Backtested performance is purely hypothetical and does not reflect actual trading in clients’ accounts. Backtesting differs from actual performance, because it utilizes the retroactive application of a model that was designed with the benefit of hindsight.
  • Third-party ratings are no guarantee of future investment success. Working with a highly-rated advisor does not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client nor are they representative of any one client’s evaluation. Generally, ratings are based on information prepared and submitted by the advisor. A detailed explanation of how Five Star ratings are formulated is available at: https://www.fivestarprofessional.com/fiveStarAssets/pdfs/programOverviewManagers.pdf
  • Third-party rankings from Barron’s, Five Star Professional, and other organizations, are no guarantee of future investment success. Working with a highly-rated advisor does not ensure that a client or prospective client will experience a higher level of performance. These ratings should not be construed as an endorsement of the advisor by any client. Generally, rankings are based on information prepared and submitted by the advisor. The Barron’s rankings are based on the volume of assets managed by advisors and their teams, revenues generated, and the quality of the advisors’ practices. The quality of practice component of the ranking includes regulatory record, length of time in the industry, charitable and philanthropic work, and other factors. Investment performance is not an explicit criterion, because clients' investment goals differ. Please contact the advisor for a detailed explanation of how ratings were formulated. Barron’s “The Top 100 Independent Financial Advisors” was published Aug. 27, 2016, Aug. 22, 2015, Aug. 23, 2014, Aug. 24, 2013, and Aug. 27, 2012. Current rankings for Barron’s “The Top 100 Independent Financial Advisors” can be found at: http://www.barrons.com/report/top-financial-advisors/independent/2016
  • Statements saying that we told our clients to be out of the market in 2008 refer to recommendations made by MMWKM’s principals while employed at Eagle Strategies, LLC. The persons who manage accounts at MMWKM are the same individuals with that responsibility at Eagle Strategies and at Cambridge Investment Research Advisors, Inc. from 2009 to 2011. MMWKM was created in 2011 and uses the same exit strategy.