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 around $2 million 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 ($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 her $100,000 brokerage account. I think our mom simply forgot to add my sister “Sue” as a co-owner. 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 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 each co-owner would have to divide the money from their co-ownership account, and send it to the other siblings.
My sister, 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 distribution, and that this set-up is straightforward and easy to co-manage.
This situation is causing a lot of stress and distrust among my siblings, which I hate, since I suggested we change things to make our mother’s financial situation as simple as possible, especially at the time of death. I did not suggest this because I don’t distrust my brother Joe. Right now, no one is touching our mother’s accounts, and I am largely paying for her expenses, as she lives with me.
Please advise.
Frustrated Sibling
Also read: My wife and I sold our home to her son at a $100,000 discount. He’s now selling at a $250,000 profit. Do I ask for a cut?
“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.”
MarketWatch illustration
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 Sue — 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 this account, he will only enjoy a step-up in basis on 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 you, your sister and your two brothers will inherit whatever else is left in the estate.
Limitations to power of attorney duties
It’s virtually impossible to tell without more information, but your sister Sue, as power of attorney, is unlikely to have the ability to change the ownership of these accounts, unless it is otherwise specified in the terms. It will 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,” according to Welch Law in this POA overview. “However, it doesn’t create any ownership interest in the bank accounts. It allows access and signing authority.”
“If the person’s parent wants to add them to the account, they become a joint owner of the account,” the law firm says. “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 you plan to manage that in the months and years ahead.
Will your brothers fulfill their promise and make you and your sister whole? Only time will tell.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.
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