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A joint bank account can make your financial life easier and less complicated if you manage your money with another person, such as a spouse or partner. But while a joint savings or checking account offers many everyday banking conveniences, there are some factors you should consider before opening a joint bank account rather than opening one on your own.
What is a joint bank account?
A joint bank account is an account that you share with another person for things like paying the bills, depositing paychecks or saving for a vacation or down payment for a car.
Most often, joint accounts are held by one individual and a significant other, family member or business partner. However, any two people can open a joint bank account together if they choose.
How do joint bank accounts work?
Joint bank accounts work very similarly to other bank accounts. Joint checking accounts work like checking accounts, letting you write checks and use a debit card. Joint savings accounts work like savings accounts, keeping your money safe and paying interest.
The primary difference is that both people who own the account have full control over it. With a joint checking account, you can get two debit cards and two checkbooks. Either account owner can write checks or make purchases. Both account holders can also add funds or withdraw them from the account.
The money in joint accounts belongs to both owners. Either person can withdraw or use as much of the money as they want — even if they weren’t the one to deposit the funds. The bank makes no distinction between money deposited by one person or the other.
This makes the account useful for handling shared expenses, but be sure to only open a joint account with someone you fully trust, like a spouse, as you are giving that person complete control over the money you put in the account.
Benefits of a joint bank account
The biggest perk of opening a joint account is the convenience of having money in one place. A joint bank account can be helpful if you and someone else have joint responsibilities, like running a household or business, as it allows you to both contribute to and withdraw from the account, says Lauren Anastasio, a financial planner at SoFi, an online personal finance company. And pay the bills, of course.
“This gives multiple people access to the account to help divvy up responsibilities,” Anastasio says.
If you’re a married couple who shares money and bills, for example, then having a joint account could make managing your finances much easier. After all, a joint account lets both of you cover expenses and pay bills with the money you share, versus having to have separate accounts and figure out how to “split” bills in another way.
Joint accounts can also help couples take advantage of benefits that may not otherwise be available to them, says Kevin Condon, senior vice president of consumer deposit and small business product management at Bank of America. For example, pooling your money can help you meet the minimum balance requirements needed to get benefits like getting maintenance fees waived or rewards that result in lower interest rates on loans.
Finally, joint ownership can also increase the amount of FDIC insurance coverage. Ravi Kumar, head of CIT Bank, says that each co-owner of a joint account is insured up to $250,000 for the combined amount of his or her interests in all joint accounts at the same insured depository institution. For example, if you owned your own account with a balance of $500,000, you’d only be insured by the FDIC up to the $250,000 limit. But if that same $500,000 was deposited in a joint account with your spouse or partner, your money would be insured for the full amount.
Is a joint bank account right for you?
If you’re wondering who owns the money in a joint bank account, that’s an excellent question. Corbin Blackwell, a financial planner at Betterment, says it’s also one that should lead you to think long and hard before opening a joint account with just anyone.
“Because joint accounts mean joint ownership, you should only fund a joint account if you completely trust the joint owner, as they will have access to funds that you deposit into the account,” she says.
If you share an account with someone who has trouble sticking to a budget, you could see more money being taken out of the fund than you’re comfortable with.
Some examples of times when a joint bank account makes sense can include:
Adult children sharing a joint bank account with their elderly parents
Business partners sharing a joint business account they use to cover expenses and payroll
Parents opening a joint account with their children and helping oversee their savings as they learn positive money habits
Michael Foguth, a financial planner at Foguth Financial Group in Brighton, Mich., says that it’s best to only open a joint account when you’re actually sharing funds with another person.
“If you like to keep your money private, then a joint bank account isn’t for you,” he says.
How to open a joint bank account
When it comes to opening a joint bank account, the process isn’t that different from opening your own account. You can sign up for joint accounts at most banks online and at some fintech companies. For example, you can sign up for a joint Cash Reserve account at Betterment. You don’t even have to be married.
When you open a joint account, both account applicants have to provide personal information, such as email address, name, address and phone number, as well as Social Security number and a date of birth.
You can also open a joint bank account by visiting a brick-and-mortar banking location and providing the same information in-person. Conversely, you can add another person to an existing bank account in most cases, usually by contacting the bank and providing all the personal information the bank requires.
How to close a joint bank account
According to Foguth, closing a joint account is similar to closing any other bank account. You may be asked to visit a physical banking branch in order to close an account, and all account holders may or may not need to be present.
With that being said, you should make sure you have proof of your identity (like a valid photo ID, such as a driver’s license) before you close a joint account. You will also need to withdraw or transfer all funds from the account before you can close it down. And you will typically need to fill out a form requesting the closure, either online or in-person.
In some cases, you may also be able to fax, email or mail a request to close a joint account. If your joint bank account is with an online bank that doesn’t have any physical locations, each individual account holder may need to enter their log-in details and approve the closure.
Can I open a joint account online?
Yes, you can open a joint account online. The process of opening a joint bank account is very similar to the process of opening an individual account. You choose a bank, select the account you want to open, and provide some personal information to do so. For a joint account, both you and the other account holder will need to provide the requested information.
After you provide the initial deposit, the bank will send the relevant account materials, like debit cards and checks, to both account holders.
Who pays taxes on a joint account?
If you and your joint account holder are married and file one tax return, all you have to do is include the interest in your tax filing.
If you file separately or aren’t married, things get more complex. But it will ultimately depend on which state you live in. Check with a tax adviser to find out what you need to do.
Another thing to consider if you have a joint bank account with someone who isn’t your spouse is gift taxes. If you deposit a significant sum to a joint bank account and your joint account holder makes a large withdrawal, it may trigger gift taxes. For 2021, the annual gift tax exclusion is $15,000, so this will only happen if your joint account holder withdraws more than $15,000 from the account without making any deposits of his or her own. Be sure to consult with a tax adviser for advice on your specific situation.
There are risks involved in opening a joint bank account, including the risk that one account owner goes rogue and withdraws all the money, or the risk of collections activity. However, joint bank accounts definitely have their place, and they can work for a wide range of consumers — especially couples who share household finances.
Whether to open an account with another person is a personal choice. Just make sure you know the pros and cons, and that you approach any joint account you have with caution.
TJ Porter contributed to an update of this article.
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