Don't Share Accounts with Elderly Parents

Dear To Her Credit,

Can I accept a financial gift from my father? My husband and I filed for Chapter 11 bankruptcy about two years ago, but we revised our case last December when we gave up our house. We were divorced in April, and I live with my father now. He wants to know if I can accept money from him or have my name on a joint account with him? He is 78 and my mom died two years ago.

- Wendy

Dear Wendy,

Yes, you can accept a gift from your father. The bankruptcy court cannot claim any part of it.

As a general rule, any money you make or receive after bankruptcy is yours. There wouldn't be much point in going through bankruptcy, after all, if your future income could be used to pay pre-bankruptcy debts. Go out and make as much money as you want, and rest assured that your old creditors can't touch it.

The courts make some exceptions to this rule. For example, bankruptcy courts don't like people filing for bankruptcy right before a parent dies -- perhaps when the parent is in ill health -- to get out of using an inheritance to pay debts. If a person receives an inheritance as a result of someone dying within 180 days of the date they filed for bankruptcy, the courts can use the inheritance to pay creditors.

The courts may also take settlement money from a divorce that a person receives shortly after a bankruptcy.

In your case, you are in the clear for two reasons: A gift from your father is not subject to post-bankruptcy claims; and you're well past the 180-day mark.

Your father is generous to let you live with him and offer to give you money. That's very helpful as you get back on your feet. Adding you to his bank account may or may not be such a good idea, however.

Parents often add their adult children to their bank accounts, thinking it will make things easier for both of them. The thinking goes that you can use the account for household needs, which makes sense when you live together. If he becomes sick or disabled, you can use the money to take care of him.

On the other hand, when he adds you as a joint owner, all the money is yours as much as it is his. I'm sure you are trustworthy, but having the money in your name makes it vulnerable to any future debts of yours, including lawsuits and collection efforts. In addition, if you have brothers or sisters, they may not be pleased to discover when your father passes away that his money is now yours. It can get messy.

One way to get the benefits of a joint account, without actually making you an owner of the account, is to give you signatory powers. Your father can give you the power to use the account, much like a business owner would give signatory powers to an employee.

You and your dad will probably need to visit the bank and show identification to add you as a signatory.

Bankruptcy, divorce and the loss of your mother, all within a short period of time, are a lot to deal with. I'm glad you and your dad can help each other through this difficult time. I hope that you have better times coming soon.