Understand some things before signing the Joint Bank Account form. Image Credit source: DEV IMAGES/Moment/Getty Images
Joint bank account seems quite easy. Two people, one account, shared access. This is common for couples, parents and adult children, or even business partners. But once money starts moving, the details often matter more than people realize. In such a situation, it is very important to understand those things before signing the form, so that any kind of difference does not arise between you and your partners. Let us try to explain those five things to you in simple language, so that there is no problem after joint account…
Choose operating mode wisely
When you open a joint bank account, the bank will ask you how it should be operated. This is not just a formality. Either or survivor means that either person can operate the account independently. Most husband and wife choose this option. This is convenient, but it also means that any one of them can withdraw the entire amount. “Jointly” means that the signatures of both are required for the transaction. This increases control but reduces flexibility.
There are other types too like former or survivor, in which only the primary account holder operates the account during his lifetime. Choose based on your level of trust and the purpose of the joint account. Don’t let convenience trump clarity.
Both have liability
In a joint account, both account holders are generally equally responsible. If there is any problem like overdraft, loan linked to the account, check bounce or outstanding charges, both are responsible. Banks do not share responsibility based on who actually used the money.
If the account is misused, it affects the credit profile of both the account holders. This becomes even more important when joint accounts are linked to credit facilities.
Explain how the money will be treated legally
People often assume that a joint account automatically means equal ownership of the money. The courts or tax authorities do not always believe this. From a tax perspective, income earned from money deposited in a joint account is generally taxable in the hands of the person who deposited the money.
From an inheritance perspective, “survivor” access does not always override legal succession laws. In some cases, surviving family members may still have a claim. Joint accounts are generally used for operational convenience; It is not an estate planning tool by itself.
Set limits in the beginning
Many disputes arise not from fraud, but from silence. If both account holders are contributing, they need to decide from the beginning how the expenses will be managed. Is it only for household bills? Will this also entail personal expenses? Will minimum balance be maintained? If one person earns significantly more than the other, clarify whether the contributions will be proportionate or equal. Joint accounts work best when expectations are clearly expressed.
Closing a joint account is not always easy
If relationships change – whether personal or business – closing a joint account requires the consent of both parties, depending on the manner of operation. In case of disagreement, the bank may freeze the account until the dispute is resolved. The matter may become complicated if necessary payments are made through it. It is not wise to keep all the savings in a single joint account. Maintain some personal financial independence.
