If you become incapable of tending to your bills, you may need another person to do it for you. Another person's ability to manage your money during your incapacitation depends on whether you properly set up your accounts. Drawing money on your account to pay your living expenses requires specific paperwork with the bank. You must designate the person as an authorized signer on your checking account before the bank can allow it.
An authorized signer is a person you designate to conduct transactions and manage your checking account. This requires working with your bank to authorize the person.
Purpose of Authorized Signers
Authorized signers often come into play with elderly parents or incapacitated family members – individuals who are without the mental or physical capacity to manage their financial affairs and require someone to sign checks and otherwise maintain bank accounts for them. Authorized signers are also used in the business world when specific employees are authorized to write checks on the company account, such as payroll and accounting employees.
Powers to Sign
The authorized signer is authorized to perform the day-to-day activities on a checking account, including writing checks, checking balances, performing transfers and depositing funds. According to Uniform Commercial Code § 4-403, the authorized signer may stop payments on written checks and even close the account.
As the owner of the account, you may limit the powers of the authorized signer by working with your bank. Contact your banking institution for the correct document to file. The authorized signer’s rights cease to exist when you as the account's owner remove him or her from the account or in the event you pass away.
Impact on Liabilities
Your authorized signer is not an owner on your account. He may write checks, but he is not personally liable to pay the bill. Make sure the person you authorize is trustworthy before giving him the power over your money, since they have the ability to incur these liabilities on your behalf. In addition, your account cannot be used by creditors to pay his debts should he get a judgment or bank lien placed against him.
Only the account owner may designate authorized signers on the account. The authorized signer cannot add or remove additional users of the account. You need to remove authorized signers in writing – the authorized signer cannot remove himself. Consider drafting up an agreement before adding the signer outlining his rights and responsibilities. If he mismanages your account, you are hard-pressed to get your money back without written documentation of his authority.