Joint Account: What It Is, How It Works, Benefits, and Pitfalls (2024)

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.

Joint Account: What It Is, How It Works, Benefits, and Pitfalls (2024)

FAQs

What is a joint account and how does it work? ›

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 pitfalls of joint accounts? ›

You cannot control how the other party spends your money. If your partner decides to spend frivolously, you will both feel the blow. This sort of problem can lead to many fights about what is necessary to spend on and what isn't. More of these issues may arise if one party brings in more income than the other.

What are the benefits of a joint account? ›

Easier to keep track of household expenses like bills, food, rent or mortgage so you can budget more easily. Two sets of income going into the account could earn you more interest than a sole account.

Can you still withdraw money from a joint account if one person dies? ›

Joint bank 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.

What is the rule on 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.

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 a spouse withdraw money without permission? ›

When a married couple opens a joint account together, they both have equal access to funds without each other's consent. Regular bank accounts, on the other hand, are owned by one person who has complete control over the account. Only the account holder can authorize transactions to and from that account.

Can I cash my husband's check if we have a joint account? ›

If you have a joint account with your spouse or partner, the bank can require that both of you sign the check if it's made out to two people. If the check is written out to just one person, either person can cash or deposit the check into the account.

Can one spouse freeze a joint bank account? ›

But generally, freezing a joint account can be done by either account holder, whether or not the couple is married. In some cases, you simply need to contact your bank and request the freeze. Typically, you will have to provide the account number plus answer some identifying questions.

Can 1 person close a joint account? ›

Both must agree, usually in writing, to close a joint account. You won't be able to do this until any overdraft has been paid off.

Does a joint account need both signatures? ›

A bank account held jointly by two parties may be named with an "and" or an "or" between the names of the account holders. Unless the account is classified as an "and" account, both parties have to sign for access to the funds.

Can someone on a joint account see my other accounts? ›

If your joint account holder uses your Login ID and password, they will be able to see all accounts associated with your Social Security Number.

Are joint bank accounts a good idea? ›

Joint checking accounts make it easy to plan and pay for expenses. Couples may want to keep joint accounts because they ensure both spouses can access money at any time.

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.

Does joint account hurt your credit? ›

Checking accounts, including joint accounts, are not part of your credit history, so they do not impact credit scores. Your credit report only includes information about your debts, and accounts have the same effect on your credit whether you are associated with the account as an individual or as a joint owner.

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