Joint account: Difference between revisions
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{{Short description|Shared bank account}} |
{{Short description|Shared bank account}} |
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{{More citations needed|date=October 2022}} |
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There are different types of '''joint account''', depending on the nature of the relationship between the account owners. Spouses and registered domestic partners' bank accounts are joint accounts, as they have a legal interest in each other's income and are responsible for each other's debts. Marriage and registered domestic partnership rights provide this type of joint account with survivorship rights. As a joint account is a single bank account, all it requires to be opened are two or more individuals or entities, who or which have chosen to share their income. Joint accounts are commonly opened by close relatives, as well as business partners. However, in other circumstances, such as a club committee, opening a bank account would require to incorporate as a separate entity, in which its members are no longer be responsible for its debts, as they would be in a joint account. In contrast, a spouse or registered domestic partner is automatically a joint account owner, even in the event the account is open by either one of them, due to the legal nature of their relations. |
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{{Globalize|date=October 2022}} |
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A '''joint account''' is a bank account that has been opened by two or more individuals or entities. Joint accounts are commonly opened by close relatives (such as by a married couple) or by business partners in an [[Unincorporated association|unincorporated business]], but it can be used in other circumstances. |
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Ordinarily, anyone can deposit funds into a joint account, but when opening an account the joint account holders may indicate to the financial institution whether a single account holder may make withdrawals or whether the consent of other account holders is required. |
Ordinarily, anyone can deposit funds into a joint account, but when opening an account the joint account holders may indicate to the financial institution whether a single account holder may make withdrawals or whether the consent of other account holders is required. |
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A joint account is not the same as adding an authorized signatory or additional cardholder to an account, a person who is authorized by the account holder to effect transactions on the account |
A joint account is not the same as adding an authorized signatory or additional cardholder to an account, that is, a person who is authorized by the account holder to effect transactions on the account. Under this arrangement the primary account holder remains fully and solely liable for all transactions on the account.<ref>{{cite journal |last1=Ogilvie |first1=M.H. |title=Bank and Customer: The Five Year Review, 2005-2010 |journal=Banking & Finance Review |date=March 2012 |volume=27 |issue=3 |pages=345-373}}</ref> Accounts by corporate entities are not, in themselves, joint accounts. |
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In some jurisdictions there is distinction of great legal significance between joint account holders describing themselves as “and” rather than as “or” instead of being determined upon the nature of their relationship, provided that if joint account holders are described with an “and”, a survivor may have difficulty accessing funds in the joint account on the death of one account holder.{{cn|date=March 2020}} So, it is important to form joint accounts that comply with applicable laws and regulations. |
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== Opening an account== |
== Opening an account== |
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When opening a joint bank account, the account holders need |
When opening a joint bank account, the account holders need instruct the [[financial institution]] how and by whom the account is to be operated. They would decide the signatories on the account. For example, withdrawals may require any account holder to sign a withdrawal or all parties to sign the withdrawal or “any two account holders” to sign, or a particular account holder with any other account holder, or some other instructions. |
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Many jurisdictions allow unincorporated businesses (such as |
Many jurisdictions allow unincorporated businesses (such as [[partnership]]s) to open a joint bank account under its business name, as distinct from the account being described by the full or partial names of the joint account holders. Proof of registration of the business name may be required. |
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Normally, a credit card account cannot be opened jointly |
Normally, a [[credit card]] account cannot be opened jointly. In the case of joint loan accounts, the account holders are [[Joint and several liability|jointly and severally liable]] for the outstanding debit balance of the account. |
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==Operation of account== |
==Operation of a joint account== |
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Normally, any person can deposit funds into a joint account, but withdrawals from the account must be |
Normally, any person can deposit funds into a joint account, but withdrawals from the account must be made according to the instructions given when opening the account. |
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The joint account holders may authorise particular named individual/s to operate on the account |
The joint account holders may authorise particular named individual/s to operate on the account. These individuals must be natural persons, and cannot be described by title (such as “treasurer” or “director”) and any change of signatories must be promptly advised to the financial institution. |
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Any joint account holder can normally instruct the financial institution to put a freeze on the account, though all account holders would normally be required to act jointly to unfreeze the account. |
Any joint account holder can normally instruct the financial institution to put a freeze on the account, though all account holders would normally be required to act jointly to unfreeze the account. |
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[[File:Bank account (UML class diagram).svg|UML class diagram depicting a bank account]] |
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==Rights of survivorship== |
==Rights of survivorship== |
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A special type of joint account with right of survivorship, called a tenancy by the entireties account, is used for survivorship accounts between spouses. This special type of tenancy by the entireties account will typically offer the account holders protection from creditors under applicable state law. |
A special type of joint account with right of survivorship, called a tenancy by the entireties account, is used for survivorship accounts between spouses. This special type of tenancy by the entireties account will typically offer the account holders protection from creditors under applicable state law. |
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== Transaction accounts == |
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Sometimes a temporary joint account is opened by two parties entering into a transaction where one party needs a security for the fulfillment of the transaction and the other party has to pay the sum (deposit), being the security for the other party. Any payment from the joint account, or return of the deposit from the joint account, will only be possible if both parties sign a joint written instruction to the bank. It is not possible that only one of the parties gives instruction for payments of the joint account.{{citation needed|date=October 2009}} |
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Some banks are not interested in opening temporary joint accounts, as they are normally used for one transaction only, there are specialised parties or companies open such accounts as trustees. A temporary joint account is normally closed after the transaction for which it was opened has been concluded. Temporary joint accounts may be used in transactions in which large sums of money are involved as an alternative to a [[letter of credit]] or [[escrow]] account.{{citation needed|date=October 2009}} |
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==See also== |
==See also== |
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{{Portal|Banks}} |
{{Portal|Banks}} |
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Latest revision as of 18:46, 19 November 2024
 | This article needs additional citations for verification. (October 2022) |
 | The examples and perspective in this article may not represent a worldwide view of the subject. (October 2022) |
A joint account is a bank account that has been opened by two or more individuals or entities. Joint accounts are commonly opened by close relatives (such as by a married couple) or by business partners in an unincorporated business, but it can be used in other circumstances.
Ordinarily, anyone can deposit funds into a joint account, but when opening an account the joint account holders may indicate to the financial institution whether a single account holder may make withdrawals or whether the consent of other account holders is required.
A joint account is not the same as adding an authorized signatory or additional cardholder to an account, that is, a person who is authorized by the account holder to effect transactions on the account. Under this arrangement the primary account holder remains fully and solely liable for all transactions on the account.[1] Accounts by corporate entities are not, in themselves, joint accounts.
Opening an account
[edit]When opening a joint bank account, the account holders need instruct the financial institution how and by whom the account is to be operated. They would decide the signatories on the account. For example, withdrawals may require any account holder to sign a withdrawal or all parties to sign the withdrawal or “any two account holders” to sign, or a particular account holder with any other account holder, or some other instructions.
Many jurisdictions allow unincorporated businesses (such as partnerships) to open a joint bank account under its business name, as distinct from the account being described by the full or partial names of the joint account holders. Proof of registration of the business name may be required.
Normally, a credit card account cannot be opened jointly. In the case of joint loan accounts, the account holders are jointly and severally liable for the outstanding debit balance of the account.
Operation of a joint account
[edit]Normally, any person can deposit funds into a joint account, but withdrawals from the account must be made according to the instructions given when opening the account.
The joint account holders may authorise particular named individual/s to operate on the account. These individuals must be natural persons, and cannot be described by title (such as “treasurer” or “director”) and any change of signatories must be promptly advised to the financial institution.
Any joint account holder can normally instruct the financial institution to put a freeze on the account, though all account holders would normally be required to act jointly to unfreeze the account.
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Rights of survivorship
[edit]One of the main issues relating to joint accounts are rights of survivorship, that is, if one of the joint account holders dies, whether the surviving account holder/s are entitled to the balance of the account.
Many husbands and wives open joint bank accounts as a cheap and easy way to avoid probate, and parent-child joint bank account holders may do the same. In some jurisdictions, passing funds in such situations may still be subject to gift duties and/or inheritance taxes.
In the United States
[edit]In the United States, there are typically two types of joint accounts: survivorship accounts and convenience accounts. Any joint owner of the account may withdraw funds during the lifetime of both owners, and most states have statutes protecting the bank from claims brought by one joint owner against the bank if the other owner "wrongfully" withdraws funds from the joint account. The distinction between survivorship and convenience accounts matters at the death of one of the owners. If the joint account is a survivorship account, the ownership of the account goes to the surviving joint account holder. Joint survivorship accounts are often created in order to avoid probate. If two individuals open a joint account and one of them dies, the other person is entitled to the remaining balance and liable for the debt of that account.[2]
If the account is a convenience account, if the person who placed the funds originally in the account dies, the joint owner does not become the owner of the account. Instead, the account becomes a probate asset of the deceased person. If the joint holder dies, who was simply put on the account for "convenience" purposes, the original owner of the account continues to own the account, unaffected by the death of the convenience account holder.
How to tell whether the account is a survivorship account or a convenience account will depend on the bank's account opening forms. The form will typically include a choice for designating the account as a joint account with right of survivorship ("JTWROS") or a joint account for convenience purposes.
A special type of joint account with right of survivorship, called a tenancy by the entireties account, is used for survivorship accounts between spouses. This special type of tenancy by the entireties account will typically offer the account holders protection from creditors under applicable state law.
