How Do Joint Bank Accounts Work?

Aditi Shekar
August 5th, 2020 | 4 mins

When you hear the words "joint bank account," you probably think of a married couple combining their finances after they tie the knot. The truth is that a joint bank account can be so much more than that. There are many situations in your life when creating and maintaining a joint financial account with another person can be beneficial.

This guide will explain everything you need to know about joint bank accounts as well as when it may be a good time for you to enter into this sort of financial situation. It will also examine some common joint bank account rules in order to help you understand how these accounts can benefit you, as well as their potential drawbacks.

The definition of a joint bank account

In short, a joint bank account is a bank account held by more than one person, with each individual having the right to deposit and withdraw funds. It's a misconception that joint bank accounts are only for married couples when in fact, you do not have to be married or even romantically involved in order to open a joint bank account.

A joint bank account can be shared between spouses, siblings, friends, business partners and even parents & children. Parents can use a joint bank account to monitor their child's deposits and withdrawals while teaching them how to manage their money. And while some accounts may allow you to set rules on how a minor child can access the money, a child over the age of 18 will have equal access to the account.

Both individuals are considered the legal owner of the account, and have an equal legal right to all funds contained within.

Who owns the money in a joint bank account?

Both account holders own all of the money equally, regardless of who deposited it in the first place (or how much one contributes). If one holder of the account dies, depending on what state you're in, the account and all money contained within will most likely transfer to the surviving holder.

This means that if one holder overdrafts the account, commits fraud, or commits other negative financial actions, both holders are considered equally liable and responsible.

Who can deposit and withdraw money from a joint bank account?

Both holders are allowed to both deposit and withdraw money into and from the joint bank account. This also means that one partner can withdraw all of the money contained without needing to obtain the consent of the other. If you open a joint bank account with someone untrustworthy, you could wake up one day and find your account totally empty with no warning.

When you open a joint checking account, both account holders will be able to use that account to write and sign checks or use a shared debit card.

Some banks will allow funds to be transferred from a joint bank account into an individual account if both accounts are owned by the same bank. Not all banks allow this, so check with your bank or credit union to understand their rules regarding transferring funds from joint to individual accounts.

When's the right time to open a joint bank account?

How do you know if opening a joint bank account is right for you — in particular, if it's a good time to do so?

Couples may decide to open a joint bank account when they move in together, when they get married, or when they're preparing to start a family. All of these represent key moments in building a life together and becoming more involved in each other's financial decisions.

For non-romantic partnerships, such milestones might not be so clearly defined. However, here are some important guidelines to consider when asking yourself if it's the right time to set up a joint bank account with your co-holder of choice:

  • Do you have an honest, trusting relationship with this person?
  • Are you and your co-holder currently financially stable or unstable?
  • Are you both employed? Are either of you in debt?
  • Do either of you anticipate a large expense (purchasing a house, car, etc.) in the near future?

Answering questions like this honestly and thoroughly is truly the best method for making an informed, careful decision.

You should also keep in mind that starting a joint bank account with another person does not necessarily have to be "all or nothing". You can continue to maintain individual accounts without committing all your wealth to the shared pool. Alternatively, you can set up the account to provide each holder with a set "allowance" each month, which they are allowed to spend as they wish.

Read our helpful guide outlining some key life milestones which are often chosen for combining finances.

How to open a joint bank account

The process of opening a joint bank account can vary depending on the bank or other financial institution you choose. However, the process is typically pretty straightforward. Often, it does not vary significantly from creating an individual account, except for the fact that the "joint bank account" box must be checked on the initial paperwork. It may also be possible to convert an existing individual account into a joint bank account by simply adding another holder.

Some banks will allow you to set up the joint bank account online, while others will require an in-person visit. In all cases, both partners will have to verify their identity by providing their social security number, address, and photo identification.

Different types of joint bank accounts - for example, joint checking and joint savings accounts - are available, so both account holders should decide together what best suits their needs. You should also always consider any perks, bonuses or other features which your chosen bank may provide when you set up and maintain a joint bank account with them.

Keep in mind that, while the consent of both parties is generally required to open the account, not all banks will require this to close the account. The majority of joint bank accounts can be closed unilaterally by either one of the holders, without the other one having to agree or even finding out at all. Make sure you understand your bank's policy regarding joint bank account closures before choosing them.

If you think that a joint bank account is right for you, then Zeta is happy to help you get started.

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