What Is a Joint Account?
A joint account is a bank or brokerage account shared between two or more individuals. Joint accounts are most likely to be used by relatives, couples, or business partners who have a level of familiarity and trust with each other.
A joint account functions like a standard account, such as a checking or savings account, and allows anyone named on the account to access its funds. All owners can withdraw cash, write checks, and make online payments.
Key Takeaways:
- A joint account is a bank or brokerage account shared by two or more individuals.
- Joint account holders have equal access to funds but also share equal responsibility for any fees or charges incurred.
- Transactions conducted through a joint account may require the signature of all parties or just one.
How Joint Accounts Work
Joint accounts work just like regular accounts, except they can have two or more authorized users. Joint accounts can be established permanently, such as an account for a couple into which their salaries are deposited. The account may also be temporary, such as an account between two parties who are contributing funds in the short term.
Bankaccounts held jointly between two parties may be titled with an "and" or an "or" between the account holders' names. If the account is listed as an "and" account, then both/all parties must sign to access the funds. If it is an "or" account, only one party must sign.
Accounts jointly held include deposit accounts at banks including checking and savings accounts, credit cards, and other credit products such as loans, lines of credit (LOC), and mortgages. The joint status authorizes all those listed on the account to full use, but also the responsibility for any payments, fees, or charges incurred.
Opening a joint account is as simple as opening up a single account. Both parties should be present at the bank when the account is open—whether that's a deposit account or another product like a mortgage or loan. For credit cards, adding a secondary or authorized user is akin to opening a joint account. In most cases, this requires the signature of the second party.
Uses and Benefits of Joint Accounts
Joint accounts can be helpful for their holders and provide several benefits. Many funds require minimum balances, particularly if the holder wants to access the benefits of a specific account type. By pooling their money, two people can bypass this requirement and reap the benefits of the account.
Opening a joint account may also be helpful to newer couples who are combining their finances. Couples may find it easier to have a single account into which they can deposit their paychecks and make payments for their rent or mortgage, bills, or other joint debts.
A senior may find it helpful to add one of their children or another authorized user to their accounts to pay bills and do routine banking on their behalf if and when they are not able to do so on their own.
Pitfalls of Joint Accounts
Joint accounts can cause problems, however, because they generally provide all parties unlimited access to the funds. Thus, if one spouse has difficulty controlling their spending habits, this may affect the other spouse, who may be more frugal. The frugal spouse cannot challenge the withdrawals or transactions of the other spouse with the bank because they are listed as a joint account holder.
Another thing to remember with joint accounts is that all parties with access are responsible for any fees. If your husband runs up your joint credit card, you are equally responsible for paying it back. Similarly, if your joint checking account goes into overdraft, you are liable for a negative balance.
The government may seize any funds in a joint account to satisfy an outstanding order. That includes back taxes that may be owed, child support, or other court-ordered garnishments.
It is best for both parties to discuss the responsibilities associated with opening a joint account before doing so. This can avoid any unnecessary problems and conflicts that may arise.
All parties should discuss the pros and cons of opening a joint account to avoid potential future conflicts.
Joint Account Rights
Several titling mechanics designate how the funds are divided if one of the parties on the account passes away. These options are required on joint brokerage accounts.
Joint Tenants with Rights of Survivorship (JTWROS): If one of the parties passes away, the assets in the account pass by the rule of law—outside of probate—to the surviving parties.
Tenants in Common (TIC): This allows each joint holder of the account to designate their beneficiary for their portion of the assets in the event they pass away. Instead of transferring by the rule of law to the second account holder, the assets are passed to the beneficiary. In addition, the assets may not be automatically split 50/50. The TIC designation allows the tenants to divide property ownership in any way they choose.
Joint Tenants option:This option mandates a 50/50 split of the assets in the joint account.
FAQs
Joint bank accounts offer many benefits, such as convenience, a larger account balance, and more FDIC insurance coverage, but they also have potential pitfalls such as overdrafts and a lack of privacy. When opening a joint bank account, both account holders must provide a government-issued ID and personal information.
What are the disadvantages of a joint account? ›
A joint account might damage your credit score
Opening a joint account adds a financial link to the other person. This means companies will look at both of your credit histories as part of any credit checks. If they have a poor credit history, this might lower your chances of acceptance.
What are the pitfalls of joint accounts? ›
“Another pitfall of a joint account occurs if one person's excessive spending puts the account into an overdraft – a very expensive way to borrow. In this instance, both parties are liable for the debt, no matter who spent the money.
How do joint accounts work? ›
Key Takeaways: A joint account is a bank or brokerage account shared by two or more individuals. Joint account holders have equal access to funds but also share equal responsibility for any fees or charges incurred. Transactions conducted through a joint account may require the signature of all parties or just one.
What are the rules of a joint account? ›
Following are the Joint Bank Account Rules in India per the account mode. Joint: All transactions in the account must be approved and signed by all the account holders. If any one of the account holders dies, the account will be deemed inoperable, and the bank will pass on the balance in the account to the survivor.
Who owns a joint account when one person dies? ›
Joint bank account holders generally have the right of survivorship, which grants the surviving account holder ownership of the entire account balance. The surviving account holder retains ownership regardless of which owner contributed the money, and the account doesn't go through the probate process.
Can my wife empty your joint account? ›
If the funds in your joint bank account are considered separate property and owned exclusively by your spouse, they may legally be able to drain the account. Similarly, even if the account is community property, a spouse may be able to withdraw money for reasonable living expenses, legal fees, and children's expenses.
Can someone steal money from a joint account? ›
If one spouse does take all the funds from a joint bank account or more than they would likely be awarded for equitable distribution, the other spouse should seek immediate legal protection. If there are no other significant assets, the spouse who took the money may spend it – making it hard to recoup what they took.
Can one person withdraw from a joint account? ›
Operation of a joint account depends upon the mandate, given to the bank. If the mandate is 'Either or Survivor', then all the account holders have equal rights and both of them can withdraw money without the consent of the other holder.
What are the advantages of a joint account? ›
The Benefits of Joint Bank Accounts:
- Easy Management of Finances - One of the main benefits of a joint account is that it makes managing collective finances easier. ...
- Avoiding Probate - ...
- Convenience - ...
- Increased Savings - ...
- Better Financial Planning - ...
- Better Credit Score -
If you have a joint account, you both may have to pay taxes on a portion of the interest income. However, the bank will only send one 1099-INT tax form. You can ask the bank who will receive the form because that person has to list the income on their tax return.
Who owns the assets in a joint account? ›
All joint bank accounts have two or more owners. Each owner has the full right to withdraw, deposit, and otherwise manage the account's funds. While some banks may label one person as the primary account holder, that doesn't change the fact everyone owns everything—together.
Which bank is best for a joint account? ›
SBI, ICICI, HDFC, Ujjivan Small Finance Bank, Yes Bank, Kotak Mahindra, RBL Bank, DBS, IndusInd and IDFC First Bank are among some of the lenders offering joint accounts.
Who has control in a joint account? ›
The primary difference is that both people who own the account have full control over it. Each account owner can get a debit card, write checks and make purchases. Both account holders can also add funds or withdraw them from the account. The money in joint accounts belongs to both owners.
What are the two types of joint accounts? ›
In the United States, there are typically two types of joint accounts: survivorship accounts and convenience accounts.
How much money should you put in a joint account? ›
Experts often recommend that couples contribute to the joint account in proportion to their income. This means that if one partner earns 60% of the household income, they should make 60% of contributions to the joint account.
Can you still withdraw money from a joint account if one person dies? ›
Joint bank accounts
Couples may also have joint bank or building society accounts. If one dies, all the money will go to the surviving partner without the need for probate or letters of administration. The bank may need the see the death certificate in order to transfer the money to the other joint owner.
Who owns the money in a joint bank account? ›
Both owners of a joint bank account own the money in it equally. That means you have the ability to deposit and withdraw funds as you wish – and so does the joint account holder. Since both people have equal ownership and access to the money, it's important to set boundaries regarding how the account will be used.
Is it better for a couple to have a joint bank account? ›
A joint account demonstrates a level of trust between a couple, playing an important emotional role. A joint account may also mean you can borrow more, as your income and savings are pooled.
Is it good for husband and wife to have a joint account? ›
Joint checking accounts promote trust and transparency.
In order to manage money together successfully, couples must be open about their financial wants, worries and goals. With joint accounts, spending can be easily viewed by both spouses, and that level of openness can be reassuring.
