A joint account is a bank account that more than one person can lawfully access. All parties are equally liable for any expenses or debts incurred.
If you and another individual share financial objectives or costs, you might consider opening a joint bank account. However, before you register a joint account, make sure you understand how it differs from an individual account and assess the possible advantages and disadvantages.
What exactly is a joint account?
A joint account is one that is shared by two or more people. It possesses the majority, if not all, of the features of a traditional bank account; the capacity to execute financial activities such as deposits and withdrawals, writing checks, and transferring cash is shared by numerous persons.
Couples prefer joint bank accounts because they make it easier to manage common spending and savings objectives. They are also beneficial to parents, older children, business partners, and housemates.
How does a joint account function?
A joint account provides all account holders with equal access to any monies held in the account, allowing them to each make withdrawals, pay bills, and transfer money. A couple, for example, may use a joint checking account to pay common expenditures like a mortgage payment and utility bills, or a joint savings account to save for a future vacation.
Everyone named on a joint account is fully responsible for the account. If one individual overdrafts the account, all account holders may be held liable for any resultant fines or debt. Similarly, one account holder might withdraw all of the money, even if other account holders did not approve, and there would be no legal redress.
That is why it is critical to only create a joint account with someone you trust and to have a solid agreement in place about how you will use it.
Joint account types
The most frequent joint accounts are checking and savings accounts. Joint savings and checking accounts are available from many traditional banks, online-only banks, and credit unions.
Alternatives to establishing a joint account
Some banks may enable you to add an authorized user to a bank account. This individual, known as a supplementary signer or convenience signer, will be able to make deposits and withdrawals but will not have the same legal rights or duties as a joint account holder.
Similarly, some banks may enable you to choose a beneficiary for your personal account. This individual would not have access to your account or funds while you are living, but would get them if you died.
A power of attorney may also be an alternative to a joint bank account, depending on the circumstances. A power of attorney is a legal instrument that allows someone else to manage a person’s money and property while the individual is still alive. Before granting power of attorney, like with creating a joint account, make sure you choose someone who is dependable and trustworthy.