Considering Adding Someone to Your Personal or Business Bank Account? Here's What You Should Know First.
If you're considering adding someone to your business or personal bank accounts, here is some food for thought before you take action.
If you own a small business, then you have a few bank accounts — at least I hope so. Most likely, you have a checking account or two, a few savings accounts and maybe some type of investment accounts as well. Now, when it comes to banking, and if you're a one-man or one-woman operation, it's just you on the account. But what about when your company gets bigger and bigger, and you have a difficult time keeping up with what's happening in your accounts?
This is the point when you need to add people to your accounts to ensure that everything gets paid and there are no overdrafts. Here are some ideas and suggestions that can help you navigate the ins, outs, risks and rewards of having someone on your business bank accounts.
Adding someone to your business bank account
Signer: This is when you add another owner or a high-level employee (obviously one that you trust) to help you get your business banking done on time, every time. For banking purposes, this does not mean that they own the company in any way, they are just a signer on the bank account. They will be able to write checks, make cash withdrawals, order items like stamps, new checks and their own debit cards. They can also get online access, which is often a huge help to so many business owners as this person can help with bill pay, sign up for other online services, call the bank to inquire about fees or charges that they see on the account and any other account info they need. This is a great step if the business is growing and the owner can only do banking about once a week or so, which allows the signer to handle the day-to-day.
Downside? You better trust this person, as they have every right to write any check for any amount they want, even to themselves. They can literally clean you out by making a large cash withdrawal if they wanted to. To get the money back, the bank will not help since you were the one who added them as a signer on the account. You would have to take them to court for that matter. In the end, just be careful.
Adding someone to a personal bank account
POA: Having a Power of Attorney added to your bank account can be a big help if you will be, for example, going in for surgery and will be out of commission for a few weeks or months. Or if you plan to travel overseas for a few months. Or for that "just in case" thing that usually happens in life. By designating someone as a POA, they can act on your behalf to ensure that bills are being paid, checks are being written, the mortgage is getting paid, etc.
For this, you'll need to have the proper documents, which a good attorney can complete for you. Each bank is different in its requirements for a POA, but these papers will always need to be reviewed by the legal department of the bank before anyone can be actually added. Often, the paperwork is incomplete because the account owner is doing the paperwork themselves, so be sure to consult an attorney for this.
One more thing, if the account owner passes away, the POA is immediately null and void. POA is only good for people who are living.
POD: POD (Payable On Death), which is also referred to as a beneficiary for many banks, is also a good thing to have on your accounts. Let's say you are getting much older or having extreme health issues, and the prognosis is not good, and the doctors are giving you only so much time left to live. It's a smart thing to add the family member of choice to the bank account.
And here's why: When you pass away, and you do not have a POD on the account, most times, the bank accounts will go directly to probate court, and your family will wait a long time for the funds and jump through needless hoops. Many people really need the money, too. By having the POD on the account, they can just come to any branch with your death certificate, close the account within a few days to a few weeks and have a cashier's check issued to them directly.
If not, the funds can go to probate as mentioned, or the check issued will have to be issued to the Estate of "the person who just deceased." All banks vary in their requirements as do state laws, so speak to your banker about this in detail.
Co-owner: This is just as it sounds and is similar to a signer on a business account, but this is for personal accounts, not business. To add a co-owner to the bank account, you must be present in the branch to do so. Adding someone by phone or online is generally never an option. Here is what a co-owner can do when you add them to the account: They can do any transaction they wish on the account, including closing the account. What they cannot do is remove the other owner without them being present. In the world of banking, the phrase is "if you're getting a divorce, the person who gets to the bank first gets the money."
Pro tip: There are many ways to add someone to your bank accounts — both business and personal — and there are a lot of benefits as well as a lot of risks involved, so you'd better talk to your banker. While the government makes the regulations that each bank must follow, each bank must decide what they will do to comply with that law and what logistical steps they will take to ensure that they are reducing any risk that comes with adding people to accounts. So, be sure to talk to your banker first to see what steps you need to take to make sure everything is properly conducted.
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