Q: My 83-year-old father lives in the same city as my brother. While I was visiting, my father mentioned to me that instead of paying a lawyer to prepare a power of attorney, he took my brother to the bank and put him on all of his accounts as a signator. Dad owns no real estate, and all of his bank accounts together total nearly $100,000.

There have never been any secrets in our family, but I am very concerned about this move. All money in these accounts came from my father, and all new money comes from his Social Security and pension, on which he pays income taxes. My brother did not put in a nickel. My questions are: 1. Isn't a power of attorney better than what Dad did? 2. Does my brother have to pay income tax on money he may take from these accounts for his own use, if he does? 3) Can my brother take money out of these accounts?

A: First and foremost, placing a child's name on a bank account in lieu of signing an appropriate durable power of attorney is a mistake for a number of reasons:

1. Although a fiduciary relationship already exists between your father and each of his children by virtue of the parent-child relationship, a durable power of attorney is a much better way in which to allow a trusted person to make financial decisions for the signator should he or she become incapacitated. The major reason for this is that the power of attorney should outline the duties and responsibilities of the agent. For example, the power of attorney should provide whether the agent is allowed to make gifts of the principal's money and, if so, to whom and how much. All things being equal, attorneys will often provide in documents they prepare that if a gift is made to one sibling, equal and simultaneous gifts should be made to the other siblings. Further, in order to make a gift to one's agent or attorney in fact, the power of attorney should specifically allow the agent to do so despite the fiduciary relationship created by the document.

2. If your father intends for all assets to pass to you and your brother equally at his death, then he has derailed his estate plan by placing your brother's name as a joint account holder. Why? Because the placement of another person's name on an account without more means that at your father's death, the balances of the accounts will pass outside your father's probate estate and your brother will own all accounts -- to your exclusion -- which appears to be an unintended result. This can be cleared up in most states by your father leaving a letter with the bank telling them that by placing your brother's name on his accounts, he intends only for your brother to assist him with the account and that he does not intend for your brother to receive the accounts at his death. It would also be a good idea for this language to be included in your father's will.

As to your other questions, your father -- not your brother -- is responsible for the income taxes generated by the interest earned on these accounts. Should your brother withdraw money from one of these accounts during your father's life, the amount withdrawn would be considered to be a gift from your father to him, which would not be taxable as income to your brother. The caveat here is that to the extent this gift doesn't exceed $12,000 in any year, your father should file a gift-tax return even though no taxes would be due.

A word to the wise: Get your father to a qualified attorney who can advise him of his options. Self-help on these slippery slopes can have unintended results.