Best Practices

How Does a Joint Account Work?

Date Published: Dec 11, 2019
Jim Hughes, writer at
Sophia Rodriguez, reviewer at

Thinking about merging bank accounts? It's a great way to cover shared expenses, but it doesn't make sense for every situation. Learn more about the pros and cons of sharing finances.

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A joint account is a shared bank account between two individuals. Having a joint bank account makes it easy to deposit and withdraw money and provides both account holders full access to the shared account. Couples can save and spend money together without the added effort of discussing how to divide their funds. The purpose of a joint account is that it is accessible at any time and both users have equal ownership. Couples can use their account as a savings account for a large financial expense, such as a vacation or buying a home. In addition, a joint account holder may choose to withdraw funds for other financial purposes. Therefore, trust is crucial when it comes to opening a joint bank account. It is a large financial step; however, it can be beneficial to both parties.

Discussing joint credit cards.

Who Owns the Money in a Joint Bank Account?

Both joint account owners join the responsibility of how their money is saved and spent. Should one of the account holders die, the rights of survivorship vary with different types of joint accounts. In some cases, the other account holder can still obtain access to the account without having to hire a lawyer or provide a will.

Having a joint bank account can reap several benefits for couples. Such advantages include making it easier to:

  • Cover shared expenses, such as rent, car payments, electric bills, etc.

  • Save money together for specific financial goals
  • Manage financial responsibilities such as budgeting and paying bills on time

In some cases, account holders enjoy the added benefit of being insured by the Federal Deposit Insurance Corporation (FDIC).

While a joint account is advantageous to those who share their finances, it does have its drawbacks to take into consideration. A few cons include:

  • One account holder may overdraw funds, which means both parties are at risk for possible fees
  • If one account holder does not make payments in a timely manner, creditors may require money from the account for settlements
  • Those sharing the same joint account may have different tax commitments, so it is vital to talk to a financial advisor an accountant during tax season to avoid high taxes
  • As both account holders can see all transactions in the account, issues may arise between couples regarding how to spend the money.

Joint Bank Account Requirements

What Do You Need to Open a Joint Bank Account?

Opening a joint bank account is a simple process. It involves the same steps used to open a regular account – the only difference is to choose the option for a joint account. The information one must provide for a joint account includes the following:

  • Social Security number
  • Photo identification
  • Address
  • Date of birth

Some banking institutions allow the account holder to add another user to the existing account. The new user will have to add in their personal information and additional documents, if necessary. It is important to discuss the terms of the joint account between both parties. Couples should decide who will assume responsibility of overdrafts on the account, or how to split monthly bills.  It is also a good idea to keep a separate account while in a marriage for personal expenses and finances.

Types of Joint Bank Accounts

There are a few options when it comes to choosing a joint bank account. Many accounts allow each owner to have equal access to the account. The only significant difference what happens if one of the owners dies.

Joint Tenants with Right of Survivorship (JTWROS)

This type of account is the most common option and can be opened for two or more people. Usually, account holders are married, but this is not a requirement to open this type of account. Most credit unions and banks offer a JTWROS.

Joint Tenants in Common (JTIC)

The Joint Tenants in Common Account option allows both users to have equal access to the account. The only difference is how the money is divided when one of the account holders dies. In this case, the deceased account holder’s funds go to their estate and may have to go through the probate process. Probate is the legal process involving the distribution of a person’s assets and estate. In order to avoid any probate issues, account holders have the option of selecting a payable-on-death option. This allows funds to pass directly to the heirs instead of dealing with probate.

Tenants by the Entirety (TBE)

Tenants by the Entirety is solely for married couples and is used to protect marital assets from creditors when one account holder passes away. Each spouse fully owns the property, as opposed to 50/50 split between the couple. As a result, when one person dies, the property will go to the other spouse instead of passing through probate. However, this option may not be available in every state.

Alternative Financing

Not everyone can qualify for a bank account. Those looking for a payday loan with no bank account may be able to find a lender that will let them co-sign on the funding. Those who do have a bank account may be able to qualify for a traditional cash advance.

Can I Open a Joint Bank Account with my Mother?

Opening a joint bank account with an older parent has its benefits and potential drawbacks. It is an easy way to help parents keep track of their child’s bills and regulate their spending. In addition, it helps prevent potential fraud, such as unexplained purchases or overdrafts on the account. In case of a parent’s death, the adult child will have access to the account and will not have to go through probate.

There are some details to consider when it comes to sharing an account with a parent. Transactions are not private, and parents will be able to see all purchases and transactions, which may not be pleasant to those who like privacy regarding their finances.

The money within a joint bank account is considered one of the parent’s assets. As a result, if their assets are ever seized, it may include the money in the account, and the child will have to deal with those consequences as well.

Finally, parents can withdraw money from the account whenever they choose to, as they have full access to the balance. While some children do not mind this, others prefer full control over their money.

Factors to Take into Consideration When Opening a Joint Bank Account

A joint bank account can offer many benefits for couples who wish to share their expenses and build a savings account together. It also has its drawbacks and can make spending complicated, or even increase taxes owed. It is best to sit down with a financial consultant and decide what is the most affordable and sensible option before taking such a big step with a spouse or significant other.

There are a few details to discuss when deciding to create a joint bank account:

Be open and honest about finances

Couples should be honest about how they are spending and budgeting their money. Full transparency is key when it comes to combining finances.

Create a budget both account holders agree upon

Having a budget will help alleviate the pressure of how funds should be spent, and couples can keep each other in line if expenses become out of hand.

Monitor the account

Regularly monitoring the joint account will keep both account holders on track and make sure they are both making smart financial decisions together.

Decide who handles which payments and expenses

Dividing financial responsibilities makes it easier to control where the money goes. It also helps manage payments and monthly bills when they come in.

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Jim Hughes, author at OpenLoans
Director of Content/Chief Editor
With over a decade of experience in the financial and business sectors, Jim Hughes is a leading voice in personal finance and loans.
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