A really sad situation crossed my desk this month. My client, we'll call her Sarah, has two children, SON and DAUGHTER. Sarah has had dementia for a while. Fortunately, Sarah had executed a power of attorney that allowed Daughter to manage Sarah's affairs when Sarah was too sick to do so. Unfortunately, and against my advice, Sarah insisted on putting both Son and Daughter as co-owner of Sarah's investment accounts. These accounts were Sarah's money, with no contributions by Son and Daughter.
Before Sarah became ill, and even when the dementia was advancing, Son would repeatedly ask his mother for money, and she would often give it to him. After Daughter took over, Daughter could not give son any of Sarah's money because she had no authority to give Sarah's money away. Daughter's job was to use Sarah's money to take care of Sarah. Daughter was using the investment accounts to pay Sarah's nursing home fees and other bills.
So, Son decided he couldn't wait for his mother to die to get his inheritance. He went into the account in which he was a co-owner and he took out over $100,000. There was nothing Daughter could do to stop him, because Sarah had made him a co-owner.
Not only has Son taken his mother's money, but he could end up with even more. Sarah's Last Will and Testament calls for a 50/50 split of assets between Son and Daughter. So when Sarah dies Son could end up with $100,000+ more than his sister (and that's not even counting all the money Son scrounged off Sarah before Daughter took over the finances).
Many of my clients will refuse to see themselves in this story, insisting that their son or daughter would never do that. And, truth be told, we have plenty of families where all the children bend over backwards to take care of Mom or Dad. But we also have families like Sarah's, where the writing has been on the wall for a while because one child has continually needed more and more money from the parent(s). If your family has someone like that, or someone whose money troubles never seem to go away, it is especially important to recognize the damage that child can cause if you give them access to your assets.
Don't even get me started on the situation that might arise if that child gets divorced or dies before you. Would you really want to see your money go to your daughter-in-law while you are still alive?