A joint account is a broker or bank account concerted for two and more clients. Usually this type of account is utilized by relatives, spouses, couples and business partners or colleagues, who have enough certainty and trust with each other. This commonly allows anyone listed in the account to access the funds from it. There are several ways to create accounts, where each of them has some requirements for users who intend to gain access to kept money or equity or how the co-owners may manage holdings of a passed away partner on their account.
Joint Account Explained
Joint accounts function the same way as other accounts, despite their feature to provide an access for two or more people. It’s possible to open joint accounts on a regular basis, as they’re convenient in terms of a shared budget. For example, some couples use joint accounts to keep their salaries in a common pocket. It’s also relevant for two sides who are responsible to deposit funds into a temporary account for a while.
Shared accounts may be entitled in two ways: with an «and» or an «or» between authorized users’ names. If the account is marked with an «and», both or all holders should sign up in order to get the access. If the created account keeps the title «or», then only one of the involved parties should sign.
Accounts that are held together implicate bank deposits, which include savings and current accounts, credit cards and further credit items such as lines of credit (LOC), loans and mortgages. The status of a joint account allows to activate the listed products in full use, though also does not remove all the responsibility for any fees, payments and charges.
Creating a joint account is easy as a regular single account. All the individuals who want to use a shared account must be at the bank with the account open, no matter what product it is — a loan or mortgage. As for credit cards, joining as an authorized or secondary user is alike to opening a joint account — it implies the signature of the other user.
Advantages of Joint Account
Joint accounts can be valuable for their owners and give a number of benefits. Lots of accounts need minimum balances, especially if the holder would like to acquire the benefits of a certain account type. By bringing together their budget, two people can get around such a requirement and take the benefits of a shared account.
A joint account may also be useful to newly married couples and families, who discover the way of planning a shared budget. Budgets can be clearly tracked using a spreadsheet or an online software or via smartphone apps, and simplicity will make it easy to check expenses. A person can add their partner or their children to a shared account and take the responsibility for their behalf in terms of paying fees, bills and complete routine banking if their closed ones are not able to cope with it on their own.
Disadvantages of Joint Accounts
However, joint accounts may have some pitfalls, because usually they provide users rights to dispose of the funds unlimitedly. These conditions allow one partner to run out of control and stop retaining their spendthrift tendency regardless of the actual limits, whereas the other person may appear far more reserved. As they both utilize a joint account, the frugal one can do nothing to deter uncontrollable waste.
Another aspect to pay attention to is the fact that all parties who have access to the funds are also responsible to pay all charges and fees. If your spouse spends your shared credit card, you both need to pay it back. In case if money is overspent, you are responsible to deal with negative balance as well.
The government can intercept any funds in a joint account to close an unpaid order. This case may include outstanding taxes, which can be required due to different court order’s penalties such as alimony.
Considering the nuances, it will be prudent to keep in mind the best advice for parties before giving their signatures is to discuss all the responsibilities connected with a joint account. This act can help to bypass any conflicts and troubles on the way.
There are some specific features for assigning titles that determine how funds will be divided if one of the parties in the account dies. These options are mandatory for brokerage accounts.
Joint tenants with the right to inheritance (JTWROS): due to the partner’s death, money in the account is transferred by law — outside the will — to the surviving parties.
Tenants in Common (TIC): This allows each joint account holder to designate their own beneficiary for their portion of the assets in the event of their death. Instead of being transferred by law to the second account holder, assets are transferred to the beneficiary. Also, assets cannot be automatically split 50/50. The TIC designation allows tenants to share ownership of the property at their discretion.