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Banking 101: What is a Joint Bank Account and How Can I Open One?

Written by Paul Schrodt, Published on February 13, 2020

Note: This article is part of our Basic Banking series, designed to provide new savers with the key skills to save smarter.

Joint bank accounts are deposit accounts owned by two or more individuals. They offer a more streamlined way to manage finances for married spouses, business partners, people in a relationship or even parents and their children.

While a joint bank account is a great tool for sharing money, all parties involved need to understand the pros and cons of using this sort of instrument. The rules are different than the ones for standard bank accounts, especially when it comes to who has access to the money in a joint account. Read on for all the details.

In this article we will cover:

What is a joint bank account?

Whether you choose a savings, money market or a checking account, a joint bank account provides equal access and ownership to two or more named account holders. You are entering into a legally-binding contract that states all named account holders jointly own the money in the account, regardless of how much each person deposited.

Depending on state law, a creditor of one joint account holders could garnish all of the money in their joint account to settle debts. It would not matter that all of the funds in the account were deposited by the other owner.

For example, Sam and Bobby share a joint account, and Sam defaults on a personal loan. Sam’s creditor can demand money from the joint account, even though Sam has no job and the only funds in the account are from Bobby’s paychecks.

Joint bank account pros 

  • Easy method to share resources: For spouses, friends, parents and children, people in relationships, or even business partners, joint bank accounts simplify the process of pooling money to share expenses, handle budgeting and save for joint goals. 
  • Instant access: Transactions from one person’s cash flow to another become much easier than they would be in separate individual accounts, as all parties have equal deposit and withdrawal rights.
  • Full transparency: No matter what your relationship is with the other owners of a joint bank account, as equal owners, everybody knows about all withdrawals and deposits.
  • More access to banking features from higher balances: By pooling your money with others, the owners of a joint bank account may qualify for higher interest rates, or may be able to meet higher minimum balance requirements for things like waived fees or rewards.
  • Extra deposit insurance on a single deposit account: Individual deposit accounts are insured by the Federal Deposit Insurance Corporation (FDIC) and National Credit Union Administration (NCUA) for up to $250,000 per account, per financial institution. With joint accounts, each co-owner is insured up to $250,000 for the combined amount of his or her interests.

Joint bank account cons

  • You give up a certain amount of control over your finances: Sharing a joint bank account with others means that you must share control over your money with other people. Funds placed in the account are accessible to all owners.
  • Lack of protection from co-owners’ choices: Joint bank accounts mean that any funds placed in the account could be seized by creditors in the event your co-owner gets into financial trouble. If your partner overdrafts the account, you’re both responsible for paying the non-sufficient funds (NSF) fee or overdraft protection fee.
  • Possible added emotional stress: If your relationship with your co-owner is strained, or if you feel that they are not responsible, you may find yourself worrying more about funds placed in a joint account.
  • Ownership is limited to actual people. By their nature, joint accounts are only available to individuals — legal entities like corporations and trusts cannot enter into a joint account.

How to open a joint bank account

Opening a joint account does not require special documentation above and beyond what is needed to open a standard banking account. However, ask your bank or credit union about a what they require to open a joint account, as every institution will have its own process and requirements. Here a few common steps:

  • All parties to the account must sign on opening a joint account. It’s vital for all parties to understand the agreement and the issues mentioned above before they sign on.
  • Everyone needs to provide the same personal information and identification required for opening standard bank accounts.
  • The people opening the account must be individuals, not legal entities like corporations.

Joint bank account rules

Joint bank accounts also differ from trusts, which the government looks at separately, as well as linked bank accounts (another category that may make sense for those hesitant about a joint account). In addition to having two or more people signing up equally for one, joint bank account rules offer FDIC insurance up to $250,000 for each co-owner for the combined amount of interests in a joint account.

Types of joint bank accounts

  • Joint tenants with right of survivorship: Joint tenants refer to two or more people who together own a property, such as a bank account. Joint tenants with right of survivorship status means that when one account holder dies, the account’s funds transfer to the surviving owner or owners.
  • Joint tenants in common: In this case, the owners of the account decide ahead of time how they want to distribute the funds in the account when someone dies. So if one account holder has a certain percentage claim on the funds and they die, that proportion belongs to their estate rather than to the other owner. To avoid the probate process, there is an option of a payable-on-death device, meaning that money goes immediately to the named beneficiary or beneficiaries.
  • Tenants by the entirety: This kind of account is similar to the first one above, but with an additional layer of protection. Each holder is considered a 100% owner of the account, and surviving holders are largely protected from litigation over ownership of the funds. This type of account is limited in availability, and you can’t get one in every state.

What happens if a joint bank account holder dies?

What happens to the funds in a joint account after a holder dies depends largely on the type of account in question. See the bullet list above: Choosing a right of survivorship account ensures that funds move to the other surviving owner or owners, while tenants by the entirety accounts allow for even more protection.

On the other hand, if specific instructions have been put in place by the account owners with a joint tenants in common account, funds are distributed according to how the funds were divided up at the outset, including the estate of a dead holder. The possibility of contested litigation, such as in probate court is, of course, always a possibility.  

How to close a joint bank account

Though a joint bank account is one in which all parties should enter with trust, closing it is another matter. Only one account holder needs to make the decision to close a joint account. Once a joint account hits a zero balance, a holder can take their ID to a branch and fill out a form to end the account. If closing online or in other ways, more information including from both parties may be necessary.

Looking for a joint account? Consider these options

Citi joint account

With a Citi joint account, funds are shared by all holders in joint tenancy. In other words, right of survivorship applies, and ownership transfers to the surviving holder or holders. But you can designate a different set of instructions on the signature card. 

Bank of America joint account

Bank of America assumes right of survivorship, so if one owner passes on, the other owner or owners take over the account. Documentation including a certified copy of a death certificate are needed to allow for this process. In the event that there isn’t right of survivorship, the surviving owner or owners, updated signature card and the estate of the deceased holder share funds.

Wells Fargo joint account

Wells Fargo’s joint accounts can encompass checking, savings, credit card or loan or mortgage categories. Beneficiary designations on these accounts determine how funds are split up in the event of a death. Identification of holders and beneficiaries is required.

Joint bank account alternatives

Not ready to share access to your money with another person? Consider these alternatives to a joint bank account. They could be a better solution for your particular needs.

Linked bank account

Linked accounts are two separate bank accounts with one owner each, opened at the same bank, that give you the ability to move funds back and forth between accounts. The separate holders retain control over their own money, and also get the convenience of quick transactions between the accounts.

Money management apps designed for couples

Apps may also present a desirable alternative to traditional joint accounts. Financial technology has rapidly progressed in recent years, opening the doors to apps that help couples or partners. Honeyfi, Honeydue, Zeta and Twine share similar features with slight differences.

Honeyfi emphasizes joint budgeting geared toward significant others. You can both track spending as one unit and divide expenses. While Honeyfi shares much in common with competitors, it costs $60 a year. Twine, which is free, is centered on joint savings as its core feature.

Teen bank account

Opening your first bank account can be all at once a fraught, liberating and educational experience. If you’re interested in helping your teenage child open their first account, it may make sense to go for a joint account, which allows you to more easily keep tabs on your kid’s spending.

Not for me
  |     |   Comment #1
So many IFs and BUTs in this article. It is very simple, if you can not agree on simple things before opening the joint account, you are making mistake, if one of the joint account person is a giver and the other is a saver, do not open joint account.
Money can create relationship tensions and therefore, I will never open joint account of any kind.
  |     |   Comment #3
In that situation the actual mistake is continuing the relationship.
Not for me
  |     |   Comment #4
Not true, when the bills are presented for paying, one party pays the one half of the amount(s) to the other party and all is settled without a single resentment. My relationship is still going strong after 2 decades. If you are married and only one party works, putting your spouse in a joint account makes no sense, especially if two signatures are required for a check writing. Furthermore, you do not want to explain yourself for every penny withdrawn or deposited in the account.
  |     |   Comment #2
I am wondering what this statement means listed under POD accounts: When the owner dies, the money passes to the beneficiary, if there is no cause for probate.
Not for me
  |     |   Comment #5
You can have a joint account with anyone you chose, no relationship required, in that case the POD has precedent over the joint owner.
  |     |   Comment #8
The POD is supposed to assume ownership of the account after all owners are deceased. So if at least one of the owners of the account are alive, the POD does not have any control of the account.
  |     |   Comment #6
It's a no-brainer. If you're married and your spouse is not running up large debts unbeknownst to you, the joint account is the only way to go. Assuming of course, that he/she isn't planning on cleaning you out before dumping the relationship.
  |     |   Comment #7
Well, there is the rub. You have fingered it squarely and accurately. Assumptions in this realm can be problematic . . . . . . . and particularly as the value of your joint account escalates.
  |     |   Comment #9
The only people I trust to be on a joint account is me, myself, and I. I was wiped out once by a very in love ex. She was in love with the money I earned and had saved. It does not help matters when I was the saver and she was the spender. Her motto was "money was made to be spent". She never counted on her youth running out, however when it did so did her options. Now she lives hand to mouth.
  |     |   Comment #10
There are many people who live "pay check to pay check". Some are forced to not save due to their limited income while others do not believe that saving money is necessary because "you can't take it with you" after death. Back in 19th century "merry old England", leaving a legacy was a very big deal because there were no social "safety nets". If you ran up a ton of debt, you usually ended up in debtor's prison.
  |     |   Comment #12
Has anyone considered another/narrow aspect where spouses have a joint checking account and want to add a (responsible) adult child as a joint owner. Has anyone looked at any gift tax implications assuming account balance averages in low 6 figures?

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