Should I have joint accounts with my children or rely on a Power of Attorney?

[00:00:00] Ralph Estep, Jr.: So let me ask you this. Have you ever wondered if sharing a bank account with your adult child is a good idea? Or maybe you have heard about these things called the power of attorneys but aren't quite sure how they work. Well, buckle up because today we're diving into a story that just might save your life. And trust me, you're going to be shocked at just how sad the situation can become even between a mother and daughter. So stick around to find out why sometimes keeping your money to yourself isn't selfish. It's smart. We're going to answer the question: should I have joint accounts with my children or rely on a power of attorney?

[00:00:42] Ralph Estep, Jr.: Well, let's start by taking a quick look back at yesterday's show. Yesterday, we talked about how to budget for those furry friends, those lovable money pits we call pets. And listen, I have pets. So I'm not being funny about that, but if you missed it, be sure to check it out, and trust me, your wallet and those four-legged friends will thank you.

[00:01:03] Ralph Estep, Jr.: Well, now, let's get to today's topic. We got a message from Sharon. Sharon writes this.

[00:01:07] Ralph Estep, Jr.: "Ralph, I've been listening to your show for months now and it's really helped me get a handle on my finances. Thank you for that. Here's my question. My daughter has been pushing me to add her to my bank account. She says it'll make things easier if anything happens to me. But I'm not sure if that's the best move. What do you think? Should I have a joint account with my children or rely on a power of attorney?"

[00:01:30] Ralph Estep, Jr.: Sharon, we're fixing to get real today. And I'm so glad you asked that question. Trust me; it's a situation many people find themselves in, and the answer isn't always as straightforward as you might think. And listen, I've got a story that will shed some light on this issue. Remember. This show is all about answering your question. So do me a favor, go to justaskralph.com, and let me know your question.

[00:01:56] Ralph Estep, Jr.: You know, sharing your question reminds me of a passage from the Bible. This passage speaks to the importance of wisdom in our financial decisions, and more importantly, it talks about how we should approach these matters with careful consideration. And it comes from Proverbs 13:22, and it reads this. "A good person leaves an inheritance for their children's children, but a sinner's wealth is stored up for the righteous."

[00:02:26] Ralph Estep, Jr.: Now, you might be wondering what this verse has to do with joint bank accounts and power of attorney. Maybe you thought Ralph had lost his mind. Well, let me tell you about my client, Debra. Now, this is a situation that I will not soon forget, and it really changed my view on this issue for good. It was shocking.

[00:02:42] Ralph Estep, Jr.: Her experience might just change the way you think about managing your money and planning for the future as well. So, picture my client, Debra. She's a sweet 68-year-old widow. She and her husband have been clients of mine for about 20 years. She was one of these people you meet.

[00:02:58] Ralph Estep, Jr.: She had a heart of gold. And truth be told, she had a savings account that matched that. And, and she was, Debra's one of those hardworking people. She worked her whole life. She always took care of her husband and her daughter. She would pinch pennies. She was very frugal. She made smart investments. And she didn't have this huge nest egg.

[00:03:16] Ralph Estep, Jr.: It wasn't enormous, but truth be told, it was enough to see her through her golden years with comfort. You know, she, she wouldn't be able to spend every nickel she had, but she could live with comfort. Well then, one day, Lisa, her daughter, and the apple of her eye were close. I mean, you are talking about a mother and daughter that were close.

[00:03:32] Ralph Estep, Jr.: You look at this from the outside, and these two are inseparable. They did the craft fairs together. They did the garage sale together. They did all those things together. Lisa had always been there for her mom, even when her father passed. You know, they would come in after that, and they would see me together to get the taxes done. One day, Lisa suggested that they open a joint account. And she used the word to Debra just in case. Debra didn't think twice about it.

[00:03:57] Ralph Estep, Jr.: After all, Lisa was responsible, she was caring, and she had always shown us she had her mother's best interest at heart. So fast forward six months, and guess what happened? Mom and daughter had a falling out. Deb and Lisa had a falling out over something that Deb tells me, in retrospect, was really trivial. It was one of those mother-daughter spats.

[00:04:17] Ralph Estep, Jr.: I know you've heard of those things and usually blow over in a day or two. But this time, something was different. In fact, it was so different. The next time Debra checked her bank balance, she nearly went into cardiac arrest. To her surprise, the account was empty. I mean, every last cent was gone. Think for a minute; can you imagine the panic? Can you imagine the betrayal and sheer helplessness?

[00:04:42] Ralph Estep, Jr.: She called me, and I didn't know what to say. It was terrible. Before she called me, she called the bank. You know, because Debra was certain there had to be some mistake. The bank must have put the money in the wrong person's account, or something had to have happened. But the bank representative words hit her like a ton of bricks. This is exactly what she said.

[00:05:00] Ralph Estep, Jr.: I wrote it down. So I didn't forget. She said, "I'm sorry, ma'am, but your daughter had every right to withdraw that money. She's a joint account holder." Wow. And in that moment, Debra's world crumbled. Her safety net, her peace of mind, and her future all vanished in the blink of an eye.

[00:05:18] Ralph Estep, Jr.: Now I know what you might be thinking, Ralph, that's terrible, but surely that's a rare occurrence, right?

[00:05:25] Ralph Estep, Jr.: I wish I could say yes. But the truth is I've seen this story in variations of this story play out more times than I care to count. The truth is that old age and death sometimes bring out the ugly in people. Now, sometimes it's just a child taken advantage of, you know because they're having tough times with a well-meaning family member, you know, maybe that person gets into financial trouble and just dips into that joint account as a quick, easy fix, you know. They're going to put that money back, but then they never do. So you might be asking what Debra could have done differently. You might ask Ralph how she could have protected herself while still ensuring her daughter could help if needed. I'm going to give you the answer. And that answer, in my view, is a power of attorney. So, let's start by addressing what is a power of attorney.

[00:06:09] Ralph Estep, Jr.: That might be what you're asking. Now listen, I am not an attorney. So, I want to be clear. I'm not giving you legal advice. I'm going to give you practical advice. I'm going to encourage you, if you want to move forward with this, talk to a licensed attorney. So, a power of attorney is a legal document that allows you to point someone you trust; that's the key to making decisions, another key, on your behalf if you're not able to do so. Now, unlike a joint account, it doesn't give the other person immediate access to your money. Instead, it only comes into effect under certain circumstances. The best part is that you define these.

[00:06:45] Ralph Estep, Jr.: That's the key. You define those circumstances. Now, there are generally two types of power of attorneys that are particularly relevant and the ones I want to talk about here. The first one's called a durable power of attorney. This is what you probably hear most people having. And this type remains in effect even if you become incapacitated. You put it together ahead of time, and it allows your appointed agent, who is the person you select, to manage your financial affairs. Maybe it's paying your bills and making financial decisions, but they do those things on your behalf. Now, as an aside, I will say they're supposed to act in your best interest. So that's when you make sure you and we'll get to that a little bit later, you want to make sure you're selecting the right person.

[00:07:25] Ralph Estep, Jr.: Now, the other type of power of attorney is what's called a springing power of attorney. That springing or Springer you might've heard. And this is the kind of power of attorney that only Springs into action when a specific event occurs, such as maybe you set it up so that if I become incapacitated, if a doctor says that I'm no longer able to make decisions for myself, then when it springs into action. And a lot of people like these because they provide an extra layer of protection and don't grant any powers until they're absolutely necessary. Now, in this particular example with Debra, both of these options would have allowed Debra to maintain control of her finances while she was still able to do that when she still had the wits about her to make those decisions.

[00:08:06] Ralph Estep, Jr.: And she certainly did. But it would give Lisa the ability to step in if she was needed. Now listen, a lot of people say to me, Ralph, look, legal documents can seem intimidating. But trust me. Trust me on this. Doing those legal documents is a lot less scary than watching your life savings disappear overnight.

[00:08:25] Ralph Estep, Jr.: You don't want to live that life that Debra lived all because she had a falling out with her daughter. So the next logical question you're asking is, Ralph, what can I do to protect myself? Well, let me give you some actionable steps. Going to start off with number one. I have said this three times already, so consult with a lawyer.

[00:08:42] Ralph Estep, Jr.: I am not a lawyer. But lawyers can help you understand the nuances of these powers of attorney and help you choose the right option for your situation. Now, I did an interview with my attorney several months ago, and I'm going to put a link in the show notes. You go back and re-listen to that because Kevin and I went through all the nuances of the different documents you should have. And I'm going to strongly encourage you to go back and listen to it.

[00:09:05] Ralph Estep, Jr.: Like I said, I'll put a link to it in the show notes. The second thing. And this one is critical. You know, meet with the attorney. Consult with that attorney, but the second thing you've got to do is you've got to choose that agent wisely. This has got to be somebody that you trust implicitly. This is somebody who needs to have a good head for finances and who's going to respect your wishes.

[00:09:28] Ralph Estep, Jr.: Now, let me tell you about a situation that happened in my own family. I had a, my wife had a cousin named Johnny. Johnny had set up his legal documents so that when something happened to him, his power of attorney wasn't a power of attorney. At this point, it was an executor because he only passed away.

[00:09:44] Ralph Estep, Jr.: He had certain things that he wanted to get done, certain ways he wanted his assets to be distributed. Well, guess what? Johnny selected the wrong person. And it got crazy because none of Johnny's wishes were taken into account. I'm not going to get into the details. It's not the place to do it, but that's why I say you've got to choose that agent wisely.

[00:10:04] Ralph Estep, Jr.: In Johnny's case, he had particular things that he wanted to have done. I mean, there was even discussion about how he had a place, he was cremated, which is what he wanted, but he actually had a vault for his ashes, and his ashes actually sat on someone's mantel for months because they wouldn't read the document that said what he wanted to have done.

[00:10:24] Ralph Estep, Jr.: And he had particular assets that he didn't want shared with certain people. But they didn't pay attention to it. So again, number two, choose your agents wisely. And just as Johnny did, my wife's cousin, Johnny, you got to be specific. You have got to clearly outline what powers you're granting. Under what circumstances and when they come into effect, this is what it needs; this is why you need to work with an attorney who understands estate planning documents. You have to be specific and clear about it.

[00:10:51] Ralph Estep, Jr.: Number four. A lot of people forget about this and that you've got to review and update these things regularly because, guess what? Life changes. You get married, you get divorced. You become a widow, or you add a child, and you have a grandchild. It is critical that you review it annually and make any changes once major life events happen. Again, I did an episode about this. Estate planning mistakes a few months ago. I'm going to put a link to that episode in the show notes. I want to encourage you to go listen to it cause I really broke down to things where this breaks. And this is a time when you don't want things to break.

[00:11:26] Ralph Estep, Jr.: So if you put things in motion, you've got these things set up because your goal is to have things play out in a certain way. And then all of a sudden, they don't play out that way because the person you selected or the things that you set up were done correctly; why did you bother in the first place? And last but not least.

[00:11:44] Ralph Estep, Jr.: And this one is complicated because trust me, like I said a little while ago, Old age and death bring out the ugly in people. I've seen it in my own family. I've seen it in my client base. But you've got to communicate openly. You got to discuss those decisions with your family. That will avoid misunderstandings and hurt feelings down the road. I would even venture to say have a family meeting if it's possible. Sit down with all the parties involved around a big table, maybe have some pasta and sauce or, you know, have some meatballs or go, you know, sit down with everybody and have a discussion. Because think about it like this. A lot of people think this is about distrust, but setting up a power of attorney isn't about distrust. And Deb learned this the hard way.

[00:12:27] Ralph Estep, Jr.: It's about protecting yourself and your loved ones. But more importantly than that, it's about ensuring your wishes are respected no matter what happens. So, let's recap for a second. Now, while joined accounts might seem like an easy solution, as Debra learned, they can open you up to significant risk. A power of attorney, on the other hand, like I talked about, allows you to maintain control of your finances while still allowing Lisa, in our case, to step in if she was needed. So, Sharon, I'm going to come back to you here. I hope this helps you answer your question. And remember Sharon, Sharon, if you don't hear anything else I say today, It's not selfish to protect your financial future.

[00:13:08] Ralph Estep, Jr.: It's just not. You've worked for that. You've put that money aside. You've done those things. It's why stewardship of the resources that God has blessed you with to protect those things. And look, I know it's a lot to consider. It's not easy. These are hard discussions. Nobody wants to talk about this stuff. But I encourage you to reach out for assistance and guidance and make the best decisions for you. Well, don't forget to tune in tomorrow when we'll be talking about it. This is a great topic after today's discussion. How can I manage my anxiety by using my faith?

[00:13:41] Ralph Estep, Jr.: Because maybe this brought on a lot of anxiety. It does with a lot of people. But it's going to be a powerful episode you don't want to miss. Now, maybe you're sitting there thinking, Ralph, all this sounds great. But dude, I'm not even sure how to apply it to my specific situation. You might feel lost. You might feel overwhelmed.

[00:13:59] Ralph Estep, Jr.: You might feel like, Ralph, I don't even know where to start. But I've got some great news for you. I can help you. You can schedule a one-on-one appointment with me, and I will go through these types of discussions with you. I'm going to help you better manage your financial life. And the first step is yours.

[00:14:14] Ralph Estep, Jr.: Go to askralph.com and click on the banner that says book a call with Ralph. Now, I do charge a $150 consultation fee. But I'm going to work with you to improve your finances. Maybe you have business finance issues. Maybe you're looking for somebody to help you grow your business. I will help you achieve all of your financial goals. It starts with creating a personalized plan just for you, not some boilerplate that works for everybody. Now you might be saying, Ralph, you want to charge me $150. Why in the world would I spend money to speak to you?

[00:14:45] Ralph Estep, Jr.: And guess what? That's a fair question. It's a reasonable question. Money is money. But my guarantee is that if you don't get at least $150 worth of value from the call, I will refund your money.

[00:15:00] Ralph Estep, Jr.: Can't say it any clearer than that. So don't wait. Schedule today, and let's start your journey to financial freedom together. Remember this. My passion is to help you achieve financial success. This is what I do. This is why I turned the microphone on. I get in front of this camera every day. Because I want you to live out your dreams and I want you at the same time to grow in your faith. Because I know this. I've done this since 1994.

[00:15:23] Ralph Estep, Jr.: Yes. Do the math. It's 30 years. Now, in 2024, maybe you listen to this after the fact, and it's even further. But this is what I know. This is what I do. This is what I do. I help people. And I know together, we can master your finances from that Christian perspective. And you're not going to get that in the secular world. There are a lot of people that can teach you how to be a scoundrel. And they might help you financially, but are they doing it for the right reasons?

[00:15:47] Ralph Estep, Jr.: And that's what I bring to the table. So, as I always end the show, I want to encourage you. Stay financially savvy, listen to more podcasts, tune in tomorrow, go back and listen to some of our old shows, and grow your wisdom. And God bless you.