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What Is a Joint Bank Account, and Is It Right for You?


Written by Jessica Merritt | Edited by Ali Cybulski | Published on 5/17/2024

 

A joint bank account is an account owned by two or more people. It can be a convenient way to manage shared finances as long as all account owners trust one another and can communicate honestly about their finances.

Joint accounts can include checking, savings and business accounts at a bank or credit union. Essentially, a joint account functions like an individual account, except that everyone named on the account can manage it.

Consider the pros and cons and how to open a joint account carefully before you proceed.

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What is a joint bank account?

A joint bank account provides equal account access and ownership to all account holders. That means each person on the account can deposit or withdraw funds, among other activities, with or without the consent of other account holders.

Joint bank accounts are typically held by people in close relationships, whether married or unmarried partners, parents and children, or seniors and caregivers.

Some people may open a joint account and combine all their cash. Others may open a joint account and also keep their individual accounts, linking them all to transfer funds as needed.

How does a joint account work?

A joint bank account works like an individual account but allows more than one person full access to the money.

If you want to combine bank accounts, you do not have to be married or even live at the same address. The type of joint account — checking, savings or business account — will depend on your circumstances. You can open a joint account with a business partner, a roommate or a teenage child, for example.

The money in a joint bank account belongs to all owners equally, and they can use the funds as they see fit. That generally includes the right to transfer funds or close the account, although state law may provide protection in certain cases, according to the Consumer Financial Protection Bureau.

If a joint account owner dies, the funds pass directly to the surviving owner if the account has what is called the “right of survivorship.” But what happens in this situation generally depends on the account agreement and state law.

How to open a joint account

The process of opening a joint account is similar to opening an individual account. But the exact steps can depend on the financial institution.

Some banks allow you to apply online and select a joint option in your application, while others require you to make an appointment at a branch. In either case, all account owners will likely need to provide personal information, including address, birthdate, Social Security number and photo ID.

Alternatively, many banks allow you to add a co-owner to an individual bank account. Typically, you’ll need to handle this in person, bringing personal information only for the person you’re adding.

Can you open a joint account online?

Most banks, including online-only banks, allow you to open a joint account online if you have the required information for all account owners.

You’ll typically need the following information for each applicant: Social Security number, birthdate, address and a valid U.S. driver’s license, state-issued ID or military ID. Generally, you’ll complete an online application and then make a deposit by transferring money from another account.

Joint bank accounts for couples

A joint bank account can be useful for couples, especially with shared expenses, but choosing to have a joint account is always easy. The account owners may have different spending styles, or one owner may have a lot of debt.

A common strategy is to open a joint account and keep separate accounts but link them all. This allows you to control your individual finances and share a joint account for mutual savings or expenses.

However, some people prefer one joint account because it can be convenient for paying combined expenses and dividing financial duties. It can also minimize stress if a spouse or partner dies, providing the survivor continued access to the funds.

Before opening a joint bank account, understand that both account holders have equal rights to the money. That’s regardless of the source and the size of the deposits.

Remember that a joint bank account is built on trust. Make sure you can have honest discussions about finances with your spouse or partner to avoid relationship strain.

Pros and cons of joint bank accounts

A joint bank account can simplify your financial life and introduce potential stresses to relationships. These are the primary pros and cons of joint bank accounts:

Pros:

  • Convenience. A shared account can simplify and streamline your finances, making budgeting and tracking spending easier.
  • Benefits for a larger balance. Pooling your funds might allow you to avoid account fees, unlock a better interest rate or earn certain rewards. Also, if you jointly own an account backed by the Federal Deposit Insurance Corp. (FDIC) or the National Credit Union Administration (NCUA), you will qualify for additional insurance. If you own an account with one other person, then the FDIC or NCUA, respectively, will insure up to $250,000 for each co-owner, or up to $500,000 overall. A single account is insured for up to $250,000.
  • Fewer legal headaches in a crisis. If one account holder becomes ill, the other retains access to funds to pay medical and other bills. If a partner dies, the other partner has access to the account without involving a lawyer or having to locate a will.

Cons:

  • Lack of control. The other account owner can access the money you deposit, and both owners can see every transaction, creating a problem if a relationship ends.
  • Creditor claims to money. Creditors, collection agencies and government agencies, such as the IRS, may be able to garnish money from a joint account, even if it’s not your debt. Laws and limits can depend on where you live and other factors.
  • Potential for conflict. Sharing an account can create emotional strain if you’re not on the same page financially, especially if one owner is less responsible with money.

Is a joint bank account a good idea?

A joint bank account can be a good idea, but it depends on how well the account owners can blend their financial lives.

Whether to have joint or separate bank accounts — or a combination — is a personal decision.

However, recent research suggests that couples who pool resources and share financial goals are happier than those who don’t. Even discussing the possibility of a joint account could encourage couples to communicate more openly about money, which can help relationships.

This doesn’t mean a joint account will be right for everyone. Maybe one partner owns a business, and you need to separate finances for accounting purposes.

Avoid a joint account if you’re concerned about a partner’s money habits, such as overspending or collection accounts. Make sure you can trust each other and are confident in your shared goals before proceeding.

How to close a joint bank account

You might need to close a joint bank account when a relationship ends, a partner dies, you decide to change banks or for many other reasons. Know that banks have different rules about account closure.

Some banks allow one account holder to close the account, and others require consent from all parties. Check your account agreement for details on closure policies.

If the joint account is with an online bank, each account holder may need to log in and approve the closure. Account holders may also need to provide ID, such as a driver’s license, state ID or passport.

Do not close the joint account without having another account into which you can transfer your money. Make sure the balance is zero before you close the account.

Tax considerations for joint bank accounts

With a joint account, all account holders may have to pay taxes on a portion of any interest income. However, the bank will send only one account owner an interest income form, or a 1099-INT. The income has to be listed on that person’s tax return. The bank can tell you who will receive the form.

If you’re married and filing jointly, it doesn’t matter whose name is on the form because your income is combined. But if you file separate returns or have a joint account with someone other than a spouse, the IRS divides the taxable income based on where you live.

If you receive the 1099 form with the full amount, you may need to figure out the proper split. You must file a Form 1099-INT with the IRS for each owner showing the interest allocation and send a 1099 to each owner.

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