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https://images.mktw.net/im-91296635Dear Quentin,
I have three adult siblings living in different states, and we are disputing the circumstances surrounding the joint accounts shared with our 85-year-old mother, who has early stage Alzheimer’s. Our mom has a net worth of around $2 million, which is spread across several different bank and brokerage accounts. Late in life, she added a different sibling as a co-owner on each of her accounts to help manage her money.
My brother “Joe” is listed as the sole co-owner on the bulk of our mother’s brokerage accounts, totaling $1.3 million, while my brother “Andy” is the sole co-owner of a $600,000 bank account and I am the sole co-owner of a $100,000 brokerage account. I think our mom simply forgot to add my sister, “Sue,” as a co-owner on any account. Her intention has always been for the four of us to equally inherit her assets.
I suggested to my three siblings that we should change all the accounts to sole ownership under our mother’s name with four equal beneficiaries. I thought this could avoid many possible complications with gift taxes and distribution at the time of our mother’s death, since as it stands, each co-owner would have to divide the money from their co-ownership account and send it to the other siblings.
Sue is named as power of attorney and could manage our mother’s individual accounts as needed. However, Joe is adamant that the current setup of co-ownership of accounts is the best way to help our mother, especially to protect her against financial fraud in case she needs to move to a nursing home. He insists there will be no gift taxes with the eventual distribution and that this setup is straightforward and easy to co-manage.
This situation is causing a lot of stress and distrust among my siblings, which I hate. I suggested we change things in order to make our mother’s financial situation as simple as possible, especially at the time of death, and not because I don’t trust Joe. Right now, no one is touching our mother’s accounts, and I am paying most of her expenses, as she lives with me.
Please advise.
Frustrated Sibling
We may never know the conversations that took place when your brothers were added as co-owners. But there is a very important difference between a “co-owner” and a “co-signer” on an account.
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Dear Frustrated,
Your brothers have every reason to act like white truffle butter wouldn’t melt in their mouths.
Between them, they have sewn up your mother’s largest bank accounts, and you are very likely dependent on the kindness of these brothers to either add you to the accounts as co-owners or distribute the funds between all four siblings after your mother passes away.
I would not hold my breath for Joe or Andy to do either of these things. They can just as easily resist with politeness and smiles as with anger and resentment. I’m sorry to say that the most damaging actions — for you and your sister— have already been taken.
We may never know the conversations that took place when your brothers were added as co-owners. But there is a very important difference between a “co-owner” and a “co-signer” on an account. The latter can withdraw money but does not own the money in the account.
After capital-gains taxes are accounted for, the gap between your brothers’ respective “inheritances” will narrow somewhat. Given that Joe is a co-owner on the account, he will get a step-up in basis on only roughly half of the account’s value.
But the bottom line is that without the cooperation of your two brothers after your mother dies, you will remain with the sole ownership of the $100,000 brokerage account, and the four of you will inherit whatever else is left in the estate.
Limitations to power-of-attorney duties
It’s virtually impossible to say without more information, but Sue, as power of attorney, is unlikely to have the ability to change the ownership of these accounts unless that is specified in the terms. That would also depend on the laws of your state.
“The power of attorney permits the agent to access their parent’s bank accounts, make deposits and write checks,” Jupiter, Fla.-based Welch Law says in this POA overview. “However, it doesn’t create any ownership interest in the bank accounts. It allows access and signing authority.”
The law firm continues: “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.”
But those with power of attorney cannot self-deal when it comes to their parent’s finances. “As a POA, they are a fiduciary, which means they have a legally enforceable responsibility to put their parent’s benefits above their own,” Welch Law adds.
You should not have to pay for your mother’s care out of your own bank account. Your sister, as power of attorney, should be managing that. Talk to your siblings about your mother’s Alzheimer’s and how the four of you plan to manage her care in the months and years ahead.
Will your brothers fulfill their promise and make you and your sister whole? Only time will tell.
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