Do you often hear people talking about a joint account? Sure, you may be somewhat familiar with them, but what exactly are they? How do joint accounts work? Do they have special rules that the standard accounts don’t?
Below, we discuss essential pointers about how you can open a joint account and what this concept means.
How Do You Open A Joint Account?
Joint accounts are beneficial for people who share their finances or expenses. You can open one of these accounts with anyone- your parents, siblings, spouse, or children.
This type of account is like a personal account- but for two people. Hence, your bank requires information about you and the person you’re opening the account with. You have to provide all your details like date of birth, name, contact number, and address. Because there are two partners, joint accounts come with two debit cards and two checkbooks.
Is A Joint Account Safe?
When you open a joint account, it should preferably be with someone you trust. It’s because all the deposits of this account belongs to both of the partners. Both partners can make transactions, write checks, make installments, and avail of the account’s services. Thus, any of the partners can withdraw cash even if they don’t deposit it.
Are These Accounts Beneficial?
If you and your spouse plan to open a joint account, you can divide the bills or save your money together. This combined account saves you from hassle because you and your partner have your money in one place. That comes in handy when you share financial responsibilities with the partner.
In addition, these accounts usually offer benefits that you may not enjoy in your personal or separate accounts. It depends on the bank you’re opening your joint account with. But some benefits can include a lower interest rate on a loan or exemption from bank maintenance fees.
Are They Complex To Deal With?
If you’re opening a this type of account with your spouse, it might be a challenge to sort the finances if you get a divorce. Divorce alters how you and your partner can handle the account. Some states or banks may even have legal statutes according to which the account’s survivorship is dissolved from the time of divorce.
In addition, these types of accounts may even make your tax calculation difficult. For instance, if you have a joint savings account, all the interest you earn may be divided between partners based on your ownership ratio. Also, the federal tax rules may have withdrawal limitations.
For instance, the United States limits the annual withdrawals of joint accounts to $14,000. Any withdrawal of funds higher than this can be seen as a gift for which you may have to pay a gift tax as well.
Final Thoughts on Opening A Joint Account
Opening a joint account is a huge decision that comes with trust, advantages, and certain drawbacks. If you have decided to open a joint account, be sure it’s with someone you trust with both your finances.
While there are some risks, the benefits and the ease that these accounts offer surpass the limitations. Be sure to assess the advantages and disadvantages of the joint savings account and the bank or fintech company you will open the account with. Good luck!