To combine finances or not to combine? That’s the question many couples and family members face when deciding how to best manage joint financial responsibilities. Joint accounts come with certain benefits – namely convenience – but they’re not right for everyone. Here’s an overview of what a joint account is, the benefits, and a few considerations before opening one.

What is a joint account?

A joint account is a bank account held by two or more individuals. Joint account holders are typically couples, business partners, or family members taking care of loved ones’ (such as an aging parent) financial affairs. However, joint accounts can be held by anyone.

Any individual on the joint account can deposit into and withdraw from the account, as all account holders have equal ownership and access.

What are the benefits of joint accounts?

Convenience is the major benefit of having a joint account with an individual with whom you have shared expenses or for whom you manage financial affairs.

For example, couples who live together have many shared expenses, such as rent or a mortgage, home or renter’s insurance, groceries and utilities. Setting up a joint account can help seamlessly pay for these expenses together.

Another common scenario in which having a joint account is helpful is children managing their aging parents’ financial affairs. Children added to parents’ accounts have the authority to write checks and withdraw and deposit funds without their parents’ permission. This is helpful when parents are no longer able to manage their own financial affairs, and someone needs to make regular payments on deposits on their behalf. And when the parent passes, the child still has access to the funds. An alternative to adding a child to a joint account is to add them only as authorized signers. That way, they still have authorization to make withdraws and payments, but their access ceases when the parent passes. Be sure to evaluate each of these options before deciding which one best fits your family’s needs.

What should I consider before opening a joint account?

Before you open a joint account, it’s important you’re aware that funds in the account are equally held by all account holders. Even if one individual is contributing most of the funds, they are still equally owned by all account holders. Additionally, the funds are subject to garnishment – the legal process of collecting money to pay off debt, loss in a lawsuit, a dissolution of a marriage, and other financial dues. All funds in a joint account are subject to collection, even if only one of the account holders is being subjected to a garnishment.

Another aspect to consider is you can’t remove an individual from a joint account unless they are deceased (in which case a death certificate is needed to remove them). If you wish to have an individual account but others on your joint account are still alive, you must first close your joint account, open a new individual account and transfer the funds.

Co-mingling funds with a partner, spouse, family member or friend can be a convenient way to pay for shared expenses, but it certainly comes with its own risks. If you have any questions about joint accounts or alternatives to sharing an account, speak to your banker.

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