Joint account

A joint account is a bank account that has been opened by two people who have a legal interest in each other property, and the right to inherit from each other, also known as a right of survivorship. Joint account owners are but limited to spouses, registered domestic partners and single parents with their child(ren). Keep in mind that opening an account, on your own, will automatically be a joint account, if you are married or in a registered domestic partnership, and live in a community property state. Accounts opened by single parents, or grandparents with their children or grandchildren, will also be joint accounts, due to the legal right of survivorship existing between them. Children are considered secondary account owners until they have the legal right to sign checks, debit and credit cards purchases. All others individuals will be opened a personal bank account. Claiming a right of survivorship which doesn't otherwise exist is illegal, through any means.

A joint account is not the same as adding an authorized signatory or additional cardholder or a person authorized by the account holder to effect transactions on the account, nor is it an arrangement under which the primary account holder remains fully and solely liable for all transactions on the account. Accounts by corporate entities are not, in themselves, joint accounts either.

Rights of survivoirship are not required for the joint ownership of other assets, such as a vessel, providing, however, a significant distinction of how the names of joint account holders will be linked, on the title. Friends, business partners, or people who co-own a vehicle will have their names joined by the conjunction and, on the Title, which translates into: "the consent of the joint owner is required to sell the asset". On the other end, either one of the two spouses, or registered domestic partners may sell a jointly-owned vehicle, providing both will own the proceeds, and in reflection, their names will be linked by the conjunction or , accordingly.

Opening an account

When opening a joint bank account, the account holders need to decide who and how the account is to be operated, and instruct the financial institution accordingly. 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, and the same normally applies to loyalty programs. In the case of joint loan accounts, the account holders are jointly and severally liability for the outstanding debit balance of the account.

Operation of account

Normally, any person can deposit funds into a joint account, but withdrawals from the account must be effected in accordance with the instructions given when opening the account.

The joint account holders may authorise particular named individual/s to operate on the account, and instruct the financial institution accordingly. 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.

Rights of survivorship

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

In the United States, there are typically two types of joint accounts: survivorship accounts if you open the account with your spouse or registered domestic partner who has a legal interest in your property and the right to inherit from you when you die, also known as rights of survivorship, as opposed convenience accounts, which you open with another person who does not have any legal interest in your property nor the right to inherit from you when you die, as spouses or registered domestic partners do. 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.

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.

Transaction accounts

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.

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.

See also

• Current account (banking)
• Transactional account