There are myriad reasons why people share bank accounts. Married couples, unmarried couples, business partners and siblings are among the many pairings that opt for joint checking or savings accounts. Sometimes, though, changes in those relationships, or changing financial conditions, may cause one of the account holders to reconsider such an arrangement of pooled funds.
Bankruptcies, divorces, company dissolutions and the like can often lead to this type of re-evaluation. To remove your name from a joint account is easier with some financial institutions than with others. Key to success is the right documentation and, hopefully, the willingness of the other account holder.
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Why Asset Accounts Are Easier
Checking accounts, savings accounts, Certificates of Deposit (CDs) and other bank products where assets are held are, by their very structure, more accommodating for a holder to withdraw from. This is because, most of the time, nothing is owed to the bank or credit union.
Granted, an account now and then can be in the negative due to overdrafts and the associated penalties. Nevertheless, for a co-holder to pull out without taking anything along is no skin off the bank's nose. Thus, removing a name is less problematic.
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The Challenge of Credit Accounts
Credit cards, mortgages, auto loans and other extensions present a different scenario since joint holders are answerable for each other's debt. In fact, as with a mortgage co-signer, each holder is responsible for 100 percent of it. Herein lies the problem of removal.
The only recourse is to ask the co-holder to reapply for the line of credit individually. If that application proves successful, the bank would ordinarily have no problem deleting the other borrower's name and liability. This demands sacrifice and cooperation on the person whose name will remain on the loan.
Read More: What Is a Joint Bank Account?
Removing a Name from a Joint Checking/Savings Account
There is no universal formula to take your name off of a joint account. Each bank retains its own policy for that contingency and, in the absence of the other account holder, sometimes forbid it. However, with a positive balance in the account and no cash withdrawal sought, a co-holder can be victorious in terms of name removal.
Many banks make forms available in which the petitioner will surrender any and all rights to the money in the account. That, supported by authoritative identification, is often enough. Other banks, however, demand that a joint account be closed altogether, or at least that the other account owner be present for the transaction.
The Importance of Foresight
Clearly, removing a name from a joint account is not always smooth sailing. A corollary of this is that two people should think carefully before opening one. Often, the prospect of it seems like the right thing to do and the idea is egged on by banks with perks to offer for new accounts. While relationships can be ended unilaterally, joint assets like bank accounts often have stronger bonds to sever.
Action Items Just in Case
As is evident, there are some financial institutions that are very slow to grant any name deletion from joint accounts. Those who think they might want to be free of such an account should prepare:
- Maintain a verifiable and recognizable photo ID.
Keep copies of the account statements for yourself.
Ask about the bank's name removal policy when opening the account.
- Talk with the co-holder about such an eventuality.
Although there are benefits to sharing bank accounts, realize that some are often transitory.
Adam Luehrs is a writer during the day and a voracious reader at night. He focuses mostly on finance writing and has a passion for real estate, credit card deals, and investing.