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A trusted family member has access to my savings account. The savings account is mine, but the family member's name appears next to mine, which means that they are entitled to withdraw money from the account.

That said, I wonder what would happen to the money in my bank account if this trusted family member one day found himself indebted to a third party and the third party took legal action in order to be repaid.

Not that I think that this trusted family member would willingly pay personal debts with the money in my bank account, but if this person ever becomes indebted to a third party, either while dead or alive, would the third party (let's say the US government) be entitled to garnish money from my bank account?

Additional information: If it makes a difference as to who is technically the 'owner' of the account, when the bank sends the tax papers every year, they send the tax papers only to me.

The same bank sends the tax papers related to another account, to which I have access but am not the owner, only to the owner of the account (the same family member I referred to).

  • The answer might depend on how the account is titled; as joint owners with right of survivorship or as tenancy in common (less common). In the former case, that money also belongs to the joint owner also. In the latter case, the money belongs in proportions as spelled out in the tenancy or in equal shares if nothing to the contrary is indicated. – Dilip Sarwate Mar 16 '13 at 14:49
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    A great answer. If the family member is listed as owner, how would a third party distinguish that it's not actually owned by that person? – JoeTaxpayer Mar 16 '13 at 15:04
  • This is quite likely dependent on local law. E.g. local law here has the notion of X on behalf of ... accounts, where person X has access but not ownership. This can be used e.g. by lawyers to hold disputed money on behalf of a client. – MSalters Mar 25 '13 at 12:26
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There is a difference between an owner and a signer.

An owner is the legal owner of the funds. A signer has access to withdraw the funds. In most cases, when a new personal account is opened the name is added as an owner&signer. However, that is not always the case.

A person could be an owner, but not a signer, in a custodial arrangement. For example, a minor child may be an owner only on their account with a custodial parent listed as a signer. The minor could not withdraw from the account.

A person could be a signer, but not an owner, in a business or estate/trust account. The business or estate would be the owner with individuals listed as signers only. The business employees do not own the funds, they are only allowed to withdraw and disburse the funds on behalf of the company.

The creditor can only garnish/withhold funds that are owned by the indebted. If the second person on the account is only a signer, those funds cannot be withheld as part of a judgment against the second person (they don't own those funds).

However, simply titling the second person as a signer only is not sufficient. If you share access with the second person and allow them to spend the money for their own benefit, they are no longer just a signer. They have become an owner because you are sharing your funds with them. Think of the business relationship as an example. The employee is a signer so they can withdraw funds and pay business expenses, like the electric bill. If the employee withdrew funds and bought herself a new dress, she is stealing because she does not own those funds.

If the second person on the account buys things for themselves, or transfers some of the money into their own account, they are demonstrating that more than a signer-only relationship exists. A true signer-only relationship is where the individual can only withdraw funds on the owner's behalf. For example, the owner is out of town and needs a bill paid, the signer can write a check and pay the bill for the owner.

A limited power of attorney may be worth looking into. With a limited POA, the owner can define the scope and expiration of the power of attorney. With this arrangement, the second person becomes an executor of the owner under certain circumstances. For example, you could write a power of attorney that states something like:

John Smith is hereby granted the limited power to withdraw funds from account 1234, on deposit at Anytown Bank, for the purpose of paying debts and obligations and otherwise maintain my estate in the event of my incapacitation or inability to attend to my own affairs. This Power of Attorney shall expire on it's fifth anniversary unless renewed.

If the person you have granted the power of attorney abuses their access, you could sue them and you would only have to demonstrate that they overstepped the scope of their power.

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I would call the bank and ask how the person is on the account. If they are an owner, or are an authorized user, or what type of owner they are, etc. If the bank makes the distinction between "user" and "owner" then most likely, your funds are not able to be seized. If they are a joint owner, then, typically, 100% of the money is yours and 100% of the money is theirs and either of you could withdraw all the money, close the account, or have the money seized as part of a legal action.

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I agree with the comments so far. Access doesn't equal ownership. There are also different levels of access. E.g. your financial advisor can have access to your retirement account via power of attorney, but only ability to add or change things, not withdraw.

Another consideration is when a creditor tries to garnish wages / bank accounts, it needs to find the accounts first. This could be done by running a credit report via SSN. My guess is an account with access-only rights won't show up on such a report. I suppose the court could subpoena bank information. But I'm not an attorney so please check with a professional.

  • What are 'access only' rights? I've never heard of such a thing. If the bank gives you the right to withdraw from the account then that's equivalent to them treating the money as yours. – DJClayworth Mar 21 '13 at 19:47
  • @DJClayworth, as Ray said Power of Attorney is a good example. Someone can have the right to withdraw funds from my account but not to use them as they wish - in the PoA example they would be bound to use those funds in my best interests. – Vicky Mar 22 '13 at 13:05
  • Power of attorney is a very special case (and doesn't require you to be a signatory to the account). Is there any other example? – DJClayworth Mar 22 '13 at 13:24
  • PoA is just a tool to get access, it doesn't determine purpose of access. Besides your financial advisor, another example could be if you take a 2-year overseas work assignment, you could give access to your mother to take care of your account. Vicky is correct that someone with PoA from you has responsibility to act in your best interest, or potentially face legal action. – Ray Shan Mar 23 '13 at 23:02

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