Joint Bank Accounts: How They Work and How to Open One

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Updated on Thursday, January 9, 2020

A joint bank account provides at least two people equal access to one bank account. While you don’t have to be married or even related to have a joint bank account, you do need to consider the pros and cons of this financial arrangement. If you share your financial life with another person, chances are you need to transfer money back and forth regularly and figure out who needs to pay different bills.

What is a joint bank account and how does it work?

A joint bank account functions like any other standard bank account, but is owned equally by two or more named account holders. Each account holder can deposit or withdraw money, and each has equal ownership of the funds maintained in the account.

This makes it easier to manage shared bills, meet a bank’s minimum account balance requirements, possibly qualify for a higher interest rate or help reach a joint savings goal. It can be a good option for parents and their kids, a married couple or an adult helping their aging parents manage their finances.

Is a joint bank account right for you?

If your goals are aligned, then opening a joint bank account could be a good move. But even as your finances intertwine, it’s important to maintain open communication and build trust with your financial partner.

Start by establishing your goals and expectations for the account, says Shanté Nicole, a personal financial advisor. You and the other account owners should “be aware of one another’s spending, saving and budgeting habits prior to making the decision to combine funds.”

“Finances are very personal, and combining financial assets with someone can lead to an emotionally charged relationship,” said Brent Weiss, a certified financial planner at Facet Wealth. “Make sure the joint owner is someone you can trust.”

Linked bank accounts vs joint bank accounts

There’s a key difference between joint and linked accounts. Two joint account holders own the funds in one account, while two linked account holders won’t share ownership by connecting their two accounts. This offers autonomy to the account holders, who can control their own money while managing finances with another person.

A linked account is an account connected to another at the same financial institution, allowing the account holders to transfer funds easily and quickly. For example, two people may link their checking accounts together, or one person may link their own certificate of deposit account to their checking account. This is different from two owners who use a single joint checking account where both people share the rights to that account.

“Simply put, joint account means joint rights,” Weiss said. “Linked account means individual rights with a bit of convenience.”

Joint bank account rules

Joint bank account terms vary with every bank and even the state where you live.

In a common law state, each married person has legal ownership over their own property, including their earnings. The rules change in a community property state, where both spouses have equal legal ownership over marital property. But in both common law and community property states, there’s equal ownership when the funds are in a joint bank account. Each joint account owner can withdraw and deposit money and has equal legal rights to the funds.

If you have a joint account and go through a divorce in a community property state, the money is divided evenly, regardless of how much each person contributed. In a common law state, the court will decide how the money will be divided.

Opening a joint bank account

The process for opening a joint bank account is nearly identical to opening an account for yourself. You may need basic information for each owner, including:

  • Social Security number
  • Physical address
  • Email address

The bank may also require each account owner to sign documents in person.

Finding the best joint bank account

Joint bank accounts often offer the same benefits as individual accounts. That means the bank may limit ATM fees and monthly maintenance fees. To find the best option for you, look for an individual account that fits your needs and open it as a joint account.

As with any account, look for a bank that charges no fees (or few fees) and that comes with benefits that help you accomplish your goals. For most people, this includes free bill pay, zero ATM fees, an extensive ATM network, online account access and a low minimum balance requirement. You should also look for a high annual percentage yield (APY) to earn interest on your money.

How to close a joint bank account

The process for closing a joint bank account will depend on the bank. It’s typically a straightforward process, unless the account holders live in a community property state and are closing the account during a divorce.

Most banks will allow one joint owner to close the account while others may require all account owners to be present to dissolve the account. Just like a regular bank account, make sure you don’t have automatic bill payments associated with the account or any outstanding checks. These could trigger the account to remain open, and you could be hit with fees as well.

To avoid confusion or tension, discuss in advance how you plan to split the money among joint owners.

Advantages of a joint bank account

  • A parent can track a teen’s spending habits, transfer money to them and teach them about personal finance.
  • A joint account makes it easy to plan finances and pay for expenses together.
  • An adult child can help their aging parents manage finances.
  • Account holders may be able to save on fees. Many banks waive monthly maintenance fees as long as you maintain a minimum balance or have a monthly direct deposit. Pooling funds may help you meet this requirement.
  • Depending on the type of financial institution, the FDIC or NCUA insures accounts up to the legal limit per person, per bank and per deposit type. Because FDIC insurance applies per person, a joint bank account with two owners could get double the coverage, protecting a total of $500,000 (or $250,000 per person, the FDIC coverage limit).

Disadvantages of a joint bank account

  • A child may rely too heavily on the parent for financial guidance and to fill the account with money.
  • One account holder can drain the account without the other’s permission.
  • Tension may build if you feel the other account owner doesn’t contribute their fair share of money.
  • With two or more people withdrawing funds, it’s easy to overdraw from the account — resulting in overdraft fees.
  • Creditors may be able to go after the funds in a joint account, depending on the laws in your state.
  • Both account holders can see transactions in the account, which limits privacy.

Different types of joint bank accounts

Joint bank account type

Division of ownership

Rights of survivorship

Subject to probate

Joint tenants with right of survivorship accountEqualAll funds go to surviving ownerNo
Joint tenants in common accountNot necessarily equalEstate account opened for decedent and distributed per willYes (though can be avoided)
Tenants by the entirety accountEqualAll funds go to surviving ownerNo

There are a range of different joint account types. Which one you choose depends on how you want funds to be handled after one account owner dies, gets divorced or can’t make decisions on their own.

“Check with an experienced professional either at your bank, a real estate agency or a financial planning firm,” Weiss said. “As state laws vary, you want to make sure you understand the local laws and what solution is right for you.”

Joint tenants with right of survivorship

“Joint tenants” are two or more people who own property, which can include a bank account. When one of the account holders dies, all the property (or funds, in the case of a bank account) automatically passes to the surviving owners.

Joint tenants in common

This is a type of property or financial account owned by two or more people, but the account owners specify how to distribute their assets upon their death. For example, one account holder may own 30% of the assets while the other owns 70%. There is no right of survivorship; instead, the deceased account owner’s portion will go to their estate. If you want to avoid the probate process, you can add an option such as a payable-on-death device. This allows funds to go directly to named beneficiaries.

Tenants by the entirety

This type of account is owned by two or more people and has rights of survivorship, but with additional protection. Each individual owner is deemed to own 100% of the account. In the event one owner is sued or has other liability claims, the account is generally protected from these situations.

When one spouse dies, the property or the funds go directly to the other spouse without going through probate. This type of account isn’t available in every state, and it may only be allowed for certain types of assets. For example, some states allow it for real estate but not for bank or investment accounts.

Alternatives to a joint bank account

Joint accounts aren’t for everyone. Here are some alternatives:

  • Linked accounts: Linked accounts are connected at the same bank but individually owned, allowing account holders to completely maintain their financial independence. Ask your bank which accounts can be linked and how many can be linked at one time.
  • Convenience accounts: These accounts are owned by one person, but the account holder allows a trusted person to write checks, pay bills and perform other banking functions. There’s no survivorship option, and the person added to the account is not a co-owner. When the account owner dies, the money goes to the estate. These accounts are rare, so ask your bank if it offers this option.
  • Naming a durable power of attorney: You can give someone broader power over your finances when you name someone your “durable power of attorney for finances.” Instead of just spending money from one account, your power of attorney can handle all financial or property matters for you. As with convenience accounts, the person can only spend money for your benefit, and the money goes to your estate when you die.