Joint Checking Account Rules for Secondary Signers

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Some Americans manage their money with checking and savings accounts that have one account owner. For many, that approach is a good one. For couples, however, or those who want to bank with a friend, family member or business partner, there might be a better idea – namely, a joint account.

With a joint checking account, there is no "secondary signer" in a legal sense. Each account owner has identical account rights including cash withdrawals and deposits, the ability to serve as a check signee, the ability to transfer funds to another account and so on.

Joint Checking Account

The function of a joint savings account and an individual account is the same, the exception being that two or more people own the account equally. The joint owners may be anyone, whether they have a legal relationship, such as a husband and wife, or not.

When people open a joint account, a joint tenancy is created, which gives each person the right to the entire amount on deposit. Whatever cash assets reside within the account belong not to one person, but rather, to all the joint owners.

What’s more, the account’s total value is owned equally by the individual owners, meaning the ownership is not based on any person’s contributions and withdrawals. It can be enlarged or decreased by the acts of any or all account owners. No joint agreement or formal permission is required for any owner to deposit or withdraw cash.

Open and Closing Joint Checking Account

To open a joint bank account, each account holder must complete a financial institution’s account application. To confirm the account owner’s identity, the person must provide a valid, government-issued I.D., such as a Social Security card, driver’s license, passport or state-issued I.D. card. To confirm the account owner's residence, a utility bill or bank statement might be used.

Any account owner can close a joint checking account using an in-person or online request. It's helpful if all owners have an opportunity to designate a different account for any automatic payments or direct deposits.

FDIC-Insured Joint Account

The Federal Deposit Insurance Corporation or the National Credit Union Administration insures the funds in the joint account up to the maximum amount of $250,000 per account owner. Consequently, for a joint checking account with two owners and a balance of $700,000, only $500,000 is insured. In contrast, if $700,000 cash was deposited in an individual checking account, only $250,000 is insured.

Benefits of Joint Checking Accounts

The possible benefits of a joint checking account are many:

  • A joint account is a means for two people to pool their money when saving for a common goal, such as a vacation.
  • In the event of an emergency, the joint account provides ready access to cash to both account owners.
  • When a parent and child are account owners of a joint account, the parent has a practical means to teach the child to budget; the account grants the parent a clear view of the child's habits.
  • An owner in one location can deposit cash in the account so the other owner in a different location can easily and quickly access it.
  • When a child and parent jointly own an account, the child can act as the parent's accountant, paying bills and dealing with other financial assets.
  • Using a joint account, business partners can share the financial responsibilities of their company, such as purchasing goods and services and paying vendors.
  • A joint account can protect one account holder in the event of the death of the other, as the majority are established with “joint ownership with rights of survivorship."    

Potential Joint Checking Account Issues

A joint checking account might complicate life in several ways:

  • One account owner might suddenly make a secret withdrawal of funds.
  • When a parent and child are co-owners of the account, the child might become more dependent on the willingness of the parent to compensate for the child's bad habits, rather than less so.
  • If one account owner contributes more cash than does the other toward mutual goals, resentment could set in.
  • When one account holder mismanages account funds, both account holders are liable. For instance, a creditor can seek payment from the joint funds in the account.
  • When seeking assistance in the form of financial aid for school or an aging parent, the funds in the joint account can make establishing need more difficult.

In summary, a joint bank account might simplify the shared finances of any two people, whatever the relationship they might have. Equally likely, however, is that a joint account will make worse long-standing relationship or business issues.