I need some advice. My aunt was recently diagnosed with terminal cancer. She has no children, and my siblings and I are her heirs. I am her executor, and she also wants me to have power of attorney.
She has about $50,000 in savings and a $4,000/month pension.
A friend told me I should add my name as a joint account holder on her bank accounts because it would make managing her estate easier. They said dealing with banks is much simpler as a joint owner than as just a power of attorney.
But another friend warned me that if I become a joint owner, I might be liable for taxes on her pension deposits. That doesn’t make much sense to me since banks only report taxes on interest earned, which wouldn’t be much in her case. Plus, she wants to spend most of the money before she passes.
Is this a bad idea from a tax standpoint? Or would a joint account actually help simplify things?
Instead of a joint account, consider a Payable on Death (POD) or Transfer on Death (TOD) designation. It avoids the risks of a joint account while still making things easier when the time comes.
Laura said:
Instead of a joint account, consider a Payable on Death (POD) or Transfer on Death (TOD) designation. It avoids the risks of a joint account while still making things easier when the time comes.
Some states don’t allow POD or TOD accounts. It really depends on where OP is located.
Legally, you can have a joint account with anyone. But since you have POA, you shouldn’t add yourself to her account without her explicit decision. That could be seen as using your POA for personal benefit. If she chooses to add you herself, that’s fine.
You won’t be taxed on her pension just for being on the account. The company paying the pension only has her info on file, not yours.
Technically, you’d be responsible for a portion of the interest earned on the account since banks report that to the IRS. But with only $50K in savings, that’s probably a very small amount.
That said, if there are other heirs, a joint account could cause issues. They might claim you’re benefiting unfairly or moving money for yourself, even if you’re not. It could create unnecessary headaches.
A better approach may be to keep POA, set up a POD account, and keep careful records of any transactions in case anyone questions them.
When my uncle was dying, he added my mom as a joint owner on his accounts. It made it much easier for her to continue paying his bills while everything was going through probate. You may also want to consult an attorney about setting up a trust for her.
Having a joint account would make things easier, but it also means the money legally becomes yours. That could create issues when it comes time to divide assets with your siblings. Also, you’ll likely need to keep the account open for a while after she passes to handle any remaining expenses.
@Deborah
If you’re listed as a joint owner, the money is legally yours when she passes, regardless of what the will says. Banks only need a death certificate to remove the deceased’s name.
If an account has a POD or beneficiary designation, that also bypasses the will. Contesting it is possible but difficult unless there’s clear fraud.
A joint account makes things easier, but it can also create family drama. Since you’re the executor, you’ll be handling the finances anyway. A POD might be a better option.
I just went through this with my parent. Our lawyer recommended keeping one small joint account with enough funds to cover 2-3 months of bills. Everything else stayed in their name. This way, I had access to pay bills immediately without having to go through legal hoops.
Also, make sure to have all essential documents in one place—will, POA, birth certificate, Social Security info, deeds, insurance policies, and a list of financial accounts. It’ll save you a huge headache later.