Concerned children are often eager to help their aging parents and to be more involved in their daily affairs.
This is often prompted by a specific problem having come up, such as discovering that your parent has been overpaying for internet or cable services, for hundreds of shekels a month. Other times, it may just be a realization that your parent, unfortunately, isn’t quite as sharp as they used to be.
A well-meaning child may then try to “take over” for their parents, and start managing their bank accounts for them.
It’s important to remember that while such involvement can indeed be helpful and sometimes is very much necessary, the parent may not welcome this change or cooperate with it.
Even as one’s executive function may be decreasing and cognitive sharpness diminishing, nobody likes the idea of losing full control over their own lives. Personal autonomy is part of our self-identity.
When beginning to take a more active role in your parent’s affairs, it’s important to do so sensitively, gently, and by being as openly communicative as possible, while maintaining as much of their independence as possible.
From a legal and practical perspective, there are some important dos and don’ts when it comes to getting involved in your parents’ finances, depending on their stage of life and circumstances.
Direct Access to a Parent’s Bank Account
One simple way to become more involved in a parent’s finances is by the parent granting direct access to their bank account. A parent may be interested in allowing such access for practical reasons. An older parent may not be comfortable with online banking, for example, or perhaps would like their child to be able to call the bank for them when needed.
Additionally, one may want their child to simply be able to view transactions in the account to make sure there is no dubious activity.
Many people provide such access by sharing their login information with one of their children. While this could be helpful, it is only a partial solution.
The better and more comprehensive solution would be to give a trusted child direct signatory rights (power of attorney) on the bank account. This will provide the child with their own username and password, and enable them to communicate with the bank directly.
This can easily be accomplished by going to the bank together (the account owners and the child) and asking the child to be added as a signatory.
Here’s the important part – the child should not be added as co-owner on the account (NOT a שותף בחשבון “shutaf bacheshbon”) but rather as a מיופה כוח (“meyupeh koach”).
There are some very important differences between adding a child to the parent’s account as a signatory (which is recommended) and adding them as a co-owner (which is NOT recommended):
- If a child is added as co-owner, then when the parent passes away it may be unclear whether the account belonged solely to the parent (and therefore the entire account is part of the estate), or if the child actually has ownership rights in the account. Indeed, there have been such cases in which the child claimed that they owned half of the account!
- Even worse, in the event that the child tragically passes away BEFORE the parent (and there have certainly been such incidents), the parent’s account will suddenly become limited and would require involvement from the child’s heirs and probate of the deceased child’s estate.
- Another unfortunate scenario would be if the child finds themselves in financial trouble; In such a case, the creditors would be able to place a lien on the account, essentially freezing the parent’s funds!
- By contrast, when adding a child as a signatory, the parent retains full ownership rights on the account and may choose to remove the child at any time. Furthermore, no question surrounding ownership of the account arises, and the child’s creditors would NOT be able to take action against the parent’s account.
Adding a child to a parent’s bank account is an easy, free, and useful tool. The parent still has full ability to act in their own account independently, and can also get help from the child when needed.
This solution, of course, can only be done with the parent’s full agreement.
Enduring Power of Attorney (also known as Ongoing Power of Attorney)
Another plan you may want your parents to implement is an Enduring POA. An Enduring POA would only be activated if and when the parent became cognitively incapacitated (unable to understand and make their own decisions).
While this is a very important tool to know of and to prepare in advance, it is not without its difficulties. Once a family member is acting in a bank account via an Enduring POA, the account is marked as a “protected” account, and the bank may limit credit lines and remote transfers. This is one of the reasons why it’s a good idea, along with preparing an Enduring POA, to also add a child as a signatory directly to the account at the bank, as described above.
At this point you’re likely asking – if I can just get added to my parents’ account as a signatory, why would they need to bother with an Enduring POA?
There are several answers to this question:
- An Enduring POA is broader and covers all assets (such as pensions, savings, investments, insurance policies, etc.), not just bank accounts.
- An Enduring POA also covers medical matters and can address many other directives that a parent may want to give his/her child regarding handling of their affairs.
- When a person becomes incapacitated, a regular POA given to the child on the account is no longer valid.
That being said, it isn’t always clear when exactly someone becomes incapacitated. Having both solutions in place allows some flexibility when a parent may be in a cognitive “grey area”. If added directly to the account as a signatory, the child can help the parent even when it may be premature to declare the parent cognitively incapacitated.
Guardianship
If your parent did not take any of the above steps, and he/she is already in a state of advanced dementia or otherwise incapacitated, you may have no choice but to file a request for guardianship with the Family Court.
While this may sound daunting, if all family members agree upon who should be appointed as a guardian, then it need not be a difficult process.
Planning for Death
Some people mistakenly think that if they add a child as a co-owner to their account, then they can avoid probate. In reality, there is no easy way to avoid probate, and there is no need to try and do so either.
When an Israeli citizen dies in Israel, the death is reported to Misrad Hapnim (The Ministry of Interior – the population registry). All the banks in the country are linked to the registry and are notified of such deaths, usually within a few days.
Once the bank receives notice of the death, the account will essentially be frozen, and funds will only be released from the account for certain purposes (such as funeral expenses, debt to a caregiver, etc.), and with specific permission from the bank, until a probate order or inheritance order is received.
For couples with a joint bank account, it’s important to make sure the account has a “se’if arichut yamim” (סעיף אריכות ימים, also known as a survivorship clause), that will enable the surviving spouse to continue using the account for regular expenses until the probate order is obtained.
For a bank account that is not a joint account, after death, the heirs will begin the probate process, at the end of which they would be able to release all the funds from the account.
Summary: Dos and Don’ts Regarding an Aging Parent’s Bank Account
Do:
- Suggest to your parents that you or one of your siblings be added to their bank account as a signatory.
- Suggest that your parents prepare an Enduring POA.
- If your parent is no longer able to take such steps – consider whether your parent needs a guardian (typically, one of the children) appointed. While it isn’t always necessary to do so right away, you don’t want to wait until it’s urgent.
Don’t:
- Don’t suggest adding yourself or a sibling as co-owner of your parent’s account.
- Don’t wait until it’s too late for your parent to put a plan in place. It is MUCH easier and more pleasant for all those involved to prepare an Enduring POA in advance, and not when your parent is already showing the first signs of dementia.
- Don’t treat your parents like children, but rather, maintain their independence when possible and openly communicate with them.