Your parent has been hospitalized, and you're trying to make sure their bills continue to get paid. The mortgage is due, insurance payments are coming up, and you know there's money in their bank account to cover these expenses. But when you contact the bank, you discover you cannot access the funds.
You may be their closest family member, but that does not automatically give you the legal authority to manage their finances.
In New Jersey, whether you can access an incapacitated parent's bank account generally depends on how the account is owned and whether you have appropriate legal authority. A financial power of attorney can provide that authority, but its terms and the circumstances surrounding your parent's incapacity matter. Understanding these distinctions can help you determine what options are available and what steps your family should consider.
Can an Adult Child Access a Parent's Bank Account in New Jersey?
Being someone's son or daughter does not, by itself, give you the right to withdraw money, review account information, or make financial decisions on their behalf.
Even when your intentions are entirely focused on your parent's well-being, banks must follow account ownership rules and applicable authorization requirements.
Whether you can access the account depends on how it is owned and what legal authority you have. For instance:
- The account is in your parent's name only. You cannot access or manage the funds simply because you are their child. You need appropriate legal authority to act on their behalf.
- You are a joint account owner. You generally have the right to access and withdraw funds, but joint ownership can also create financial and legal complications.
- Your parent appointed you through a financial power of attorney. You may be able to conduct transactions covered by that document.
- You have another form of valid legal authorization. The extent of your access depends on the authority granted and whether the bank can recognize it.
Adding someone to a bank account as a joint owner can make accessing funds easier, but the right to withdraw money does not necessarily mean each owner has an equal ownership interest in the funds. Joint accounts can also be subject to creditor claims involving either owner or complicate Medicaid eligibility. These risks are worth considering before adding an adult child to an account simply to help manage a parent's finances.
Being listed as a beneficiary or payable-on-death recipient is different. That designation generally concerns what happens to the account after the owner's death, not who can manage the money during the owner's lifetime.
How Does a Power of Attorney Help You Manage Your Parent's Finances?
A financial power of attorney allows someone, called the principal, to authorize another person, known as an agent, to handle specified financial matters on their behalf.
Under N.J.S.A. 46:2B-8.2, a durable power of attorney can remain effective if your parent later becomes incapacitated. It can also be written to take effect only upon incapacity.
Depending on its terms, a financial power of attorney may authorize you to:
- Pay household bills and other expenses.
- Make deposits or withdrawals from bank accounts.
- Manage financial obligations and communicate with financial institutions.
A healthcare directive or medical power of attorney addresses medical decisions, not financial matters. It does not give you authority to access or manage your parent's bank accounts.
A carefully prepared power of attorney should identify who may act on your parent's behalf, what financial decisions they are authorized to make, and when that authority takes effect.
Will a New Jersey Bank Accept Your Parent's Power of Attorney?
New Jersey law generally requires banks to recognize a valid power of attorney that meets applicable requirements. Even so, banks have a reasonable amount of time to review the document. Before allowing an agent to withdraw or pay funds from an account, a bank may require satisfactory proof of identity and completion of its required signature card.
Under N.J.S.A. 46:2B-13, a bank can refuse a power of attorney for certain reasons, including concerns about its authenticity, whether it has been revoked, or whether your parent had the legal capacity to sign it.
If the document only takes effect upon incapacity, the bank can also require proof that your parent meets the conditions specified in it.
New Jersey law allows banks to decline certain powers of attorney first presented more than ten years after signing or that the bank has not acted on for ten years. This restriction does not apply when the appointed agent is the parent's spouse, parent, or a descendant of either parent, such as an adult child. A power of attorney does not automatically expire after ten years.
If a bank refuses to accept your parent's power of attorney, ask why. When the bank has received the agent's mailing address in writing from either the agent or the parent, New Jersey law requires it to notify the agent in writing and explain the refusal. Understanding the reason can help you identify the next steps.
What if Your Parent Never Signed a Power of Attorney?
If your parent never signed one, an important question is whether they still have the legal capacity to authorize someone to manage their finances. To create a valid power of attorney, they must be able to understand the nature and consequences of granting that authority.
A diagnosis or hospitalization does not automatically mean your parent lacks that capacity. Someone experiencing health problems can still be capable of making important legal decisions.
If your parent still has sufficient capacity, preparing a financial power of attorney may remain possible, even if they need assistance with other everyday matters.
If they no longer have the necessary capacity, however, you cannot simply have them sign a new document or sign one on their behalf.
In some situations, court involvement may become necessary to establish legal decision-making authority. New Jersey's courts provide information about these proceedings, but they are separate from the advance estate-planning services Cohler Law provides.
Preparing a power of attorney while your parent can still make these decisions may help avoid uncertainty over who has authority to manage their finances later.
What Are Your Responsibilities When Managing a Parent's Bank Account?
If your parent has appointed you as an agent through a financial power of attorney, you are acting on their behalf, not taking ownership of their money.
Under New Jersey law, an agent has a legal responsibility to act within the authority granted and for the parent's benefit. Paying your parents' mortgage or medical expenses may fall within that authority. Using their savings for your own personal expenses is an entirely different matter.
An agent must also maintain accurate records of financial transactions. Keeping your parents' money separate from your own and documenting payments made on their behalf can help prevent confusion, particularly when other family members are involved in their care.
How Can You Prepare Before a Parent Becomes Incapacitated?
If your parents are still able to make their own financial decisions, there are practical steps they can take now to make managing their affairs easier if they need assistance later.
These preparations can include:
- Discussing who should manage financial matters if needed. Your parent should choose someone they trust to act responsibly and follow their wishes.
- Reviewing existing powers of attorney. Documents prepared years ago may no longer reflect current relationships, financial arrangements, or preferences.
- Checking how financial accounts are titled. Joint ownership, beneficiary designations, and powers of attorney serve different purposes.
- Making important information accessible. Knowing which institutions hold accounts and where legal documents are stored can prevent unnecessary delays.
These conversations should also respect your parents' independence. Preparing for the possibility of incapacity does not mean they must immediately give up control of their finances.
At Cohler Law, our Voorhees estate planning attorneys help families prepare financial powers of attorney that reflect their needs and fit within their broader estate plans.
Plan Ahead to Help Protect Your Parents' Finances
If your family is considering ways to prepare for future financial decisions or needs to review existing estate-planning documents, Cohler Law can help you understand your options and prepare arrangements that reflect your parents' wishes and financial circumstances.
Based in Voorhees, Cohler Law serves individuals and families throughout Burlington, Camden, and Gloucester Counties and the surrounding South Jersey communities. Contact Cohler Law to discuss your family's estate-planning needs and learn how thoughtful preparation can help protect your parents' financial interests.
Disclaimer: The articles on this blog are for informational purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact Cohler Law directly.