What Is a Joint Bank Account?
When two or more people want or need to share the expenses and responsibilities of their funds, a joint bank account may be a consideration. If you have this type of relationship, then a joint account can make your financial transactions much easier to handle.
Types of Joint Bank Accounts
Joint Tenants With Rights of Survivorship (JTWROS) – In this, the most conventional joint bank account, all participators have equal rights to account resources and can conduct transactions without the consent of other account owners. In the event that any one of the account owners passes away, all assets are distributed among the remaining parties.
Tenancy In Common – Common among business partners, Tenancy In Common account holders may have unequal investments and thus receive proportionate interest rates. Upon the passing of any of the account owners, the proportionate assets will be distributed to the estate of the decedent.
Tenancy By The Entirety – This is a more regulated joint bank account that requires all shareholders to sign for or approve any account transactions. No one account owner may make any account transactions without the written consent and/or signature of all other holders, dependent upon the original agreement.
Choosing Your Signatory Option
Signatory
options include a “both sign” and “one sign” option. With the both sign
option, each transaction must include a signature from all names on the
account in order for any transaction to be processed. With the “one sign”
option, either of the account holders may singularly sign checks and
complete account transactions with just their own signature. While only one
signature may be needed to make any transaction, all parties are responsible
to the bank for the funds in the account and any fees that become payable to
the institution.
Choosing Your Bank
Many attractive offers exist for those looking to open a new account. High interest rates, low fees or other incentives may give way to higher account-related expenses after a pre-determined period of time. Compare the normal everyday expenses related to several financial institutions; those that kick in after the special offer is over.
Joint Bank Account Requirements
Fees – Standard fees will be charged in certain situations. Fees may be incurred, among other reasons, if the account balance falls below the minimum requirement, for overdrafts, returns, and help balancing the account.
Minimums - Most financial institutions require a minimum deposit to open the account, and many continue to require a minimum balance for the account to remain open. If minimums are consistently reached, maintenance fees may be waived.
Free Checking - Standard at many banks for individual accounts, this option may be available to the joint bank account holder. Research ahead of the actual opening to find the best deal for your long-term needs.
Choosing Joint Bank Account Partners
Choosing partner(s) to share a joint bank account is probably the most difficult decision. It is important to select someone with good credit, responsible spending habits and who does not owe any large amounts of money. In the case of married or other couples, if one is less than adept at handling financial transactions, a joint account may still be considered, with separate single holder accounts for each as well.
Reasons for Opening a Joint Bank Account
The most common reason for a joint bank account is that a married couple wants to combine funds and share responsibilities. A young person or college student needing the advantages of a checking account but without the credit or means to fund it could have a parent added to the account. Joint accounts are also held by business partners who need to have access to and control over company funds at any given time.
A joint bank account is often opened by two parties entering into a transaction where one party needs to monitor the execution of a contract by a second party. This can insure that a co-signed loan or mortgage is paid on time. Deposits may be made by either holder; however, any payment or return of deposit will only be possible if both parties sign a joint written instruction to the bank.
Joint bank accounts are often created in order to avoid probate. If two individuals open a joint account and one of them dies, the other person is entitled to the remaining balance and is also liable for any debt incurred over of that account. One of the basic features of a joint account is the "right of survivorship." Any money in the account upon the death of an account holder automatically goes, in most cases, to the surviving joint owner.
Considerations When Opening a Joint Bank Account
Opening a joint bank account holds more risks than opening a single signatory account. Since all parties in a Joint Tenant or Tenancy in Common account have the right to make unlimited withdrawals, there must be a method that allows all account owners to stay on top of all transactions. All joint owners are held responsible for bounced checks, fees and expenses.
A joint bank account is susceptible to legal actions; divorce, civil suits, and tax debts owed by any joint owner may allow funds to be seized by the claimant.
A person’s Last Will and Testament can supersede stipulations of the right of survivorship clause of a joint bank account.
Conclusion
A joint bank account has two or more owners who are equally responsible for expenses, and enjoy the profits of ownership of the account. A main aspect of a joint account is the right of survivorship, or the ownership of funds in the event of the death of another holder. There are different types of joint accounts to fit the needs of various relationships. Risks and benefits should be weighed carefully. If you want to give someone the authority to manage your money, but don't mean to share capital, there are alternatives to better meet your needs. Be sure to consult an attorney to decide which option is best for you.