Authorized User on a Bank Account vs Joint Account vs Power of Attorney: What are the differences?

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• What is an authorized user on a bank account?
• Caregiver Banking from Huntington
• What is a joint bank account?
• What is a power of attorney?
• How do I know which option is right for my financial circumstances?

There may come a time when you need to share financial access with a loved one, whether it’s an aging parent, your partner, or your teenaged child. Each situation is unique, presenting its own challenges and solutions. How do you decide what is best for your loved one while also maintaining your own financial well-being? Read on as we explore the differences between adding an authorized user to a bank account, a joint bank account, and a power of attorney (POA), and how they can help you.

What is an authorized user on a bank account?

If you’re added as an authorized user to a loved one’s bank account, you’ll receive access to their account without having ownership over the account or its funds. Authorized users can usually perform any transaction the account owner can, like viewing account balances, withdrawing cash, transferring money, writing checks, and stopping payments. Depending on your bank, account owners may have the power to limit the authorized user's capabilities if they'd like.

Adding an authorized user to a bank account could be beneficial for individuals that might need extra help managing their finances. For example, an aging parent might add their adult child as an authorized user to a checking account to help manage their bills and other expenses.

Uses and Benefits of an Authorized User on a Bank Account

• Simplified Financial Management: Authorized users on a bank account can help manage financial transactions, like depositing checks, paying bills, or transferring funds, helping loved ones stay on top of their finances.
• Transparency in Financial Activity: An authorized user can help spot potential scams and stop payments, providing an extra layer of protection to the account owner.

Considerations of an Authorized User on a Bank Account

• Privacy Concerns: As an authorized user, you can view account history and make transactions on your loved one’s behalf, which might feel uncomfortable. Most banks have safeguards in place to keep information safe and minimize the risk of fraud. But remember, bank account access should only be shared with people your loved one trusts.
• No Right to Account Funds: Authorized users have no ownership over the account and its funds. If the account owner passes away, the authorized user won’t have the ability to access the account’s funds, unless the authorized user is also listed as a beneficiary.

Caregiver Banking from Huntington Bank^¶

While Huntington does not offer the ability to add authorized users to bank accounts, we are proud to offer a form of bank account access sharing, called Caregiver Banking. Caregiver Banking allows a Huntington account owner to share limited access to their select bank accounts with a trusted individual, or caregiver. As the caregiver, you can monitor your loved one’s accounts to help identify potential scams, accidental transactions, and unusual or excessive spending. You can also perform basic transactions, like online bill pay or transferring funds between Huntington accounts, to help ensure their bills are paid on time and their account has sufficient funds.

Caregiver Banking is not a joint account, power of attorney, or an authorized user on a bank account—as a caregiver you aren’t legally bound to your loved one’s finances in any way. It’s a proactive access sharing tool meant to help you protect your loved one’s finances.

What is a joint bank account?

A joint bank account is a traditional checking or savings account, but the account is shared between two or more individuals—meaning each account holder has shared, equal ownership over the account and its funds. Any person named on the account can make a deposit, withdraw cash, transfer funds, pay bills, or make purchases.

Joint bank accounts could make sense if you and your loved one are comfortable sharing money and the responsibility of managing the account, like two spouses opening a joint checking account to easily pay and track shared bills.

Uses and Benefits of a Joint Bank Account

• Pooling Income: Combining money with another person may make it easier to qualify for accounts with a higher minimum balance that could offer better benefits, like more competitive interest rates, fewer fees, and rewards.
• Transparent Money Management: A joint bank account can help you manage shared expenses, budgets, and financial goals. With equal access to account activity, you and your loved one can help hold each other accountable to agreed upon budgets, and watch savings grow toward a shared goal.

Considerations of a Joint Bank Account

• Risk of Overdraft Fees: Since transactions can be made by any account holder without the other’s consent, potential overdraft fees could be charged if neither account holder is keeping an eye on the account balance. To help prevent overdraft fees, consider enabling account alerts^† to stay informed on deposits, withdrawals, and account balance thresholds.
• Shared Responsibility of Unpaid Debts: All account holders are equally responsible for unpaid debts tied to the account, even if only one account holder created the debt. By setting up autopay for recurring expenses, you could help keep missed payments down.

What is a power of attorney?

A power of attorney (POA) is a legal document that authorizes you to act on your loved one’s behalf, and is often used when a person is unable to make decisions for themselves due to an illness or disability. There are several types of powers of attorney, in which you may be able to make decisions about your loved one’s property, finances, or medical care:

• General Power of Attorney: Grants you the ability to act on your loved one’s behalf in all matters as allowed by state law—meaning you can usually manage investments, file taxes, sign checks, or sell property.
• Limited Power of Attorney: Provides you specific powers only under certain circumstances or for a particular period.
• Durable Power of Attorney: Remains effective even if your loved one becomes incapacitated.

A power of attorney is a proactive tool, meant to help prepare for the future. It’s also a complex legal document and professional guidance is recommended to help you and your loved one understand the implications of creating a power of attorney.

Uses and Benefits of a Power of Attorney

• Control Over Who Makes Decisions: By creating a power of attorney, your loved one has the power to choose someone they trust to manage their financial, legal, or medical matters, and they can carefully outline how their affairs should be handled.
• Minimized Disruption of Affairs: If your loved one becomes unable to make decisions for themselves, as their named power of attorney, you could seamlessly step in to make necessary legal and financial decisions on their behalf, like keeping up with their bills or making investment decisions.
  
  Without a power of attorney, your family members may have to go to court and ask to be named your loved one's conservator or guardian, which could be a slow and costly process, and could create tension between family members.

Considerations of a Power of Attorney

• Potential for Mishandling of Affairs: The individual named as power of attorney is entrusted with acting in their loved one’s best interest, but sometimes, that responsibility can be exploited. That’s why it’s crucial to choose a trusted individual and thoroughly discuss the commitment beforehand. It’s also important to work with professionals, like a lawyer and financial advisor, to create a detailed power of attorney that explicitly states what the named individual can and cannot do on your loved one’s behalf.
• Lack of Oversight: As a power of attorney, you’d have significant influence over your loved one’s finances, property, or medical needs, and you can usually make decisions without oversight or approval from others. To distribute responsibilities, your loved one could name two individuals that must agree on major decisions, or your loved one could require all actions be regularly reported to a trusted third party, like a lawyer or accountant.

How do I know which option is right for my financial situation?

Deciding between an authorized user, joint bank account, or power of attorney is a deeply personal choice that depends on your loved one’s level of independence, their financial needs, and the degree of shared responsibility you’re both comfortable with. Each option comes with its own responsibilities and potential impacts to relationship dynamics, which is why honest conversations with your loved one are essential. It’s also important to seek guidance from experts, such as lawyers or financial advisors, to fully understand your options.

Huntington is here to support you and your loved one’s financial independence. You can begin the Caregiver Banking enrollment process online, or you can reach out to a Huntington Financial Advisor^® to learn more about estate planning and safeguarding your loved one’s assets^‡.