Whether you are just establishing your financial history or already have a few accounts, understanding how to open a Joint Bank Account is something that can really boost your finances. Consumers merge their finances for different reasons. Whatever yours may be, understand that you will share the responsibility of managing the account. There are various factors to consider when opening a joint account, along with a comparison of its different forms, instructions for opening an account and advice on how to manage it well.
However, if you have both a checking and savings accounts, you can open both as joint bank accounts. Typical of a statement, a statement period is usually one month long and will not necessarily match up with the calendar month. If you wish to learn more in regards to understanding a joint bank account and how to utilize it, be sure to keep on reading!
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What Is a Joint Bank Account?
A joint account is a type of bank account that allows more than one person to own and manage it. There is no restriction regarding who can be an owner, which can include spouses, friends and business partners, among others. Everyone named on the account has equal access to funds, regardless of who deposited the money.
You don’t have to be married or even related to have a joint account depending on the type of account you choose. In this story, we’ll explain all the different types of joint bank account options you have, the rules you should know about and how to choose the right account for your needs.
How to Open a Joint Bank Accounts
To open a joint account, you must complete an application with the personal details of all the account holders. In addition, some banks may require a proof of address and identity in the form of utility bills, passports or driver’s licenses. Often, banks require the presence of all the people you plan to add as joint account holders.
Opening a Joint Bank Account has many benefits when opened in person. Doing so allows you to work with a banker to address important details around account ownership and access that you may want to customize for your particular situation.
If you’re opening a joint account with a significant other, don’t close your personal account, at least not right away. You may want to have money of your own for personal expenses or for gifts and surprises.
Pros and Cons of a Joint Bank Account
Essentially, joint bank accounts offer convenience and flexibility at the cost of exposing you to errors or misbehavior by your joint account holders. By concentrating earnings and expenses in a single place, you make it easier to understand and manage your household budget. However, joint accounts also contain multiple pitfalls you must be aware of.
Pros:
- Joint bank accounts may help simplify your finances: If you and your joint owner are splitting multiple expenses, both of you could deposit the money into one account and pay the bills from that new account.
- Helps you save on fees: Many banks require a minimum balance or a monthly direct deposit to waive monthly fees. Combining your funds may allow you to stay above the minimum balance easier; if you don’t have direct deposit but the joint owner does, this may qualify you to avoid the fee.
- Adding joint owners also increases your FDIC coverage:The FDIC covers up to $250,000 per person, per bank, and per deposit type. If you have a joint account with someone, you are granted $250,000 per co-owner. A joint account with two people would have an FDIC limit of $500,000.
- Equal Ownership: Any owner can draw or deposit funds without the involvement or consent of the other owners.
- Strict Account Closure Rules: Any owner can close the account but cannot remove another owner without that person’s permission.
Cons:
- Joint Liability: Everyone is liable if one owner mismanages the account (e.g., overdrafts), and everyone may be reported to ChexSystems.
- Limited Asset Protection: Depending on your account terms, a creditor can collect against the joint account to satisfy the debt of one owner, regardless of who deposited the money
- Divorce Issues: If you split up with your spouse, you’ll continue to share the account until it’s closed. The spouse of your co-owner going through divorce may also be entitled to funds in the account, regardless of who deposited the money.
- Reduced Benefits Eligibility: Adding a college student as a co-owner inflates his/her assets and reduces his/her eligibility for financial aid; the same is true for Medicaid long-term care eligibility of an elderly co-owner.
What Happens if a Joint Bank Account Holder Dies?
Most of the time, joint bank accounts have what is called a right of survivor-ship. This means when one account holder is deceased, the account funds will go to the surviving account holders in equal portions. Most joint accounts have just two account holders, in which case the surviving account holder receives 100% of the funds in the account.
In the other scenario, a joint account might operate under another rule called “tenancy in common”. When an account holder passes away in this case, their share of the joint account passes to their estate.
Conclusion
A joint bank account is a solid financial option for a number of situations. It offers married couples a way to budget, save and spend together. Of course there are risks that come with joint bank accounts, that you will have to keep an eye out for. That way you and your co-owner(s) don’t get hit with high fees or taxes. Always maintain honest and open communication with a joint bank account to succeed.
However, if you don’t have a bank account yet, definitely take a look at our list of Bank Bonuses, Referral Bonuses, Bank Rates as well as our CD Rates for all your banking needs.
