Have regular hours for work and play; make each day both useful and pleasant, and prove that you understand the worth of time by employing it well. Then youth will be delightful, old age will bring few regrets, and life will become a beautiful success.—Louisa May Alcott, American novelist, best known as author of the novel Little Women  (November 29, 1832-March 6, 1888

Do you think you should add one of your children, or a friend, as a joint owner on your bank account for convenience? Should you add a child to your house Deed? It is absolutely necessary to think twice about these issues, and to gather all the advice that you can before taking such a step.

Today, we’ll discuss the bank accounts.  The house deeds will wait for another column.  To remind you of the importance of correctly handling bank accounts, I would like for you to remember a story I told you n this column several years ago.  It was first published in the Wilkes-Barre Pennyslvania Times Leader.   The story illustrates that it’s possible to lose your life savings by making a fundamental estate planning mistake without guidance from an expert.  .

John DeStefano, 79, and his wife, Adeline, 83, had  health problems. After a bit of thought, (clearly not enough thought), , they decided that in the event they became incapacitated and needed someone to pay their bills, they’d like their daughter, Cindy, to have access to their money. So, they added Cindy’s name to their bank savings and checking accounts.

Bottom line:  The bank took money from the DeStefano’s accounts to cover loans taken out by their daughter and her soon to be ex husband.  The accounts had a total of $77,362.20  representing what was left of Mr. and Mrs. DeStefano’s life savings.

The couple had neither cosigned the loans nor had any interest in the corporation Cindy and her husband Scott had created for their over-the-road trucking business. Never the less, Mr. and Mrs. Stefano ended up with a check for $22.99 from the bank, the total amount left in the couple’s bank accounts.  The story of how this happened illustrates why it’s so important to seek professional advice before making estate planning decisions.

As soon as Cindy’s name was added to the accounts, the money in the accounts became available to pay her creditors. Cindy and her husband, Scott, had previously taken out loans at the bank for their trucking business. The couple later became estranged, but Cindy believed her soon-to-be ex-husband was making payments on their business loan.

Unfortunately, he was not, and so the bank took the money it was owed from an account that had Cindy’s name on it, which had sufficient funds to repay the loan. Remember, the DeStefanos had not cosigned the loans nor did they have any interest in the corporation their daughter and her husband created. But putting Cindy’s name on her parents’ accounts essentially made all of their money hers to use as she might wish.

“It’s not even enough money to bury us,” said Mr. DeStefano of the $22.99 check. “They cleaned it right out.”

The DeStefanos made a common but fundamental planning mistake by adding their daughter’s name to their bank accounts. Not only did they put the account assets at risk to Cindy’s creditors, but the change also could create an added tax problem if their daughter preceded them in death.

They needed to put Cindy on the account as a power of attorney, not as a co-owner. Had she been added to the account with power of attorney, Cindy would have been able to write checks, and have all the access she needed to her parents accounts.  However, she would not have been an account owner.  Being named someone’s Power of Attorney does not make you an “owner” of any account.  Therefore, the account owner’s funds are not available to be accessed by creditors, as they would be if the agent was an account owner instead of power of attorney.       People who want to authorize power of attorney to a child or another person should contact an elder law attorney to do so, or should notify a bank representative of their intentions.

When Mr. DeStefano contacted a bank representative in Pittsburgh, asking why the bank did not repossess the truck that was used as collateral for the loan, he was told that the bank took “the easiest way out” to recover its money by emptying the accounts with Cindy’s name on them. Cindy said that, as far as she and her parents knew, her ex-husband was making payments on the truck that had been financed through the bank.

The DeStefanos appealed to a banking regulatory agency, but research has not turned up the outcome of the appeal.  Mr. DeStefano, a World War II veteran wounded in the D-Day invasion, has had two open heart surgeries, and his wife has Alzheimer’s disease. They had counted on having their own money for their care needs.

Thank you for reading. Stay well. See you next week