Should I Give My Children Access to My Bank Account?
10 June 2019
While giving your children access to your bank account may seem like a quick and straightforward way of enabling them to manage your finances, you could be putting yourself and them at significant risk. There is a safer, more secure option available which will provide you both with legal protection, and that is to put a Lasting Power of Attorney in place.
Allowing Someone Else to Manage Your Money
An accident or illness can strike at any time in life and can render a person unable to manage their own finances. If this happens, do you know how you would pay your bills, buy your groceries or manage your investments? You might feel that the best solution to this is to grant a loved one, such as your son or daughter, access to your personal bank accounts so that they can take care of these matters for you.
However, there are a lot of associated risks for both you and your loved one if you go down this road, and there is an alternative, safer option available. This option is to put a Lasting Power of Attorney in Place
What's a Lasting Power of Attorney?
A Lasting Power of Attorney (LPA) is a legal document in which you can grant a named person legal authority to manage your affairs on your behalf. Generally speaking, this can be anyone you choose, but it's important that it's someone you trust. Most people will choose a close friend or a relative, such as a son or daughter.
There are two types of LPA available, one that covers Health and Welfare and another that covers Property and Financial Affairs. You can choose to have just one type of LPA in place or you can put both types in place.
A Health and Welfare LPA will only ever become activated if you lose the ability to make your own decisions. On the contrary, a Property and Financial Affairs LPA is a little more flexible and can be activated immediately if you wish, or alternatively you can choose for this to only be activated if and when you lose capacity.
Some people choose to activate their Property and Financial Affairs LPA while they are still capable of making their own decisions, because it's more practical to do so. For example, it may be that they are living abroad but own property or other assets which are held in the England or Wales so they want their attorney to be able to manage these assets for them. Or someone with limited mobility may choose to activate their LPA so that their attorney can go to the bank on their behalf.
How is an LPA Safer than Giving My Children Access to My Bank Account?
An informal financial arrangement with a loved one, such as giving them access to your bank account, offers little to no legal protection either to you or your loved one.
Any activity that your loved one carries out will be unregulated and unsupervised. What this means is that you will be relying entirely on trust to protect your finances, which could be put at significant risk. It also means that your loved one will not have any legal protection if questions or allegations arise as to how they've been managing your finances, as this activity will not have been monitored by an official body.
Contrary to this, by putting an LPA in place, you can give your loved one legal authority to manage your finances for you, but their activity will be supervised by the Office of the Public Guardian (OPG). This is a dedicated government body which is responsible for protecting the interests of people who are not able to manage their own affairs. The OPG will oversee and supervise the activity of your chosen attorney, and if they suspect that your attorney is not acting in your best interests, then they can investigate this.
One final point to note is that if you grant your children access to your bank account, you could be fooled into thinking that they will be able to take care of everything for you if anything does happen. This may not be the case though as they still won't automatically be able to take care of any of your other assets or finances, aside from the bank account that you've given them access to.
What this means is that if you do lose capacity in the future, your children could be tasked with the complex and expensive process of applying for a Deputyship Order. If you don't put an LPA in place while you're able and your loved ones find that they don't have the necessary legal authority to effectively manage your finances for you, then applying for a Deputyship Order will be their only option.
For more information, see What is a Deputyship Order and How is it Different to an LPA?