Joint Account Legal Cautions, Benefits And Advice

Thinking about getting a joint account? Read this article to find out the advantages and the disadvantages first!

A joint account can be defined as a financial asset that is owned by two people. The account has both owner's names on it so that either party can have access to the account. It is common for married couples to have a joint account since, once two people marry, all of their assets become community property.

However, there are other instances where two people opt to get a joint checking or savings account too. Senior citizens, for example, sometimes get a joint account with their caretaker or with a younger relative. This way, the money is still in the senior citizen's name, but the caretaker or relative can still write checks to pay their bills for them.

One advantage of a having a joint bank account is that, if, one of the two owners dies, any money in the account immediately goes to the surviving party. The money does not need to go through the red tape of a probate court. It automatically becomes the property of the sole survivor.

A joint account is an easy way to pay household bills out of one account with one check. It's easier yet if both parties have their paychecks direct deposited into the account.

Another advantage is if one spouse or party is out of town a lot because of their job, for example, a joint account allows the other person to pay the household bills and still take care of business.

While a joint account offers convenience, it can also offer either party many disadvantages. For example, if you have a joint account with your spouse, girlfriend, boyfriend, relative, et cetera, you better be able to trust them with your money. If the account is with your boyfriend or girlfriend, for example, and you break up your relationship, he or she can immediately go to the bank and drain the account dry of its assets.

It doesn't matter to the bank whose money it actually belongs to either. It's not their responsibility to keep track of that. And, your only recourse to recoup your money would be to take your ex to small claims court. Even then, you must provide proof that part or all of that money actually belonged to you.

Another possible problem, too, is if the co-owner of your account writes bad checks. By law, the returned checks will be your liability too since your name is also on the account.

The same law applies too if you or your co-owner becomes the subject of a lawsuit. His or her creditors can confiscate your part of the money that's in the account. There is virtually no separation of the money, at least by law, unless the joint account is with your spouse and you get divorced. Then, the court could divide the money between you two.

These reasons are why most financial experts recommend that you only put your name on an account if you are married.

As far as paying income tax on the interest that the money in a joint account draws, normally, the person whose name appears first on the account is the person who is primarily responsible. With a married couple who files their income tax jointly, this wouldn't matter. But, if the account is held by two people who are not married, this could present a problem.

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