Joint Bank Accounts

Sometimes, joint accounts are made up of funds provided entirely by one party. This is often an older adult. However, the other account holder may have uncontrolled access to the account. This arrangement can give rise to several issues and create major disputes. The following are some things to consider before opening a joint bank account…

• You are sharing control over the money in a joint account. This means that you have less control. You should only open a joint account with someone you trust.
• Interest earned in the account can lead to unexpected tax consequences.
• The other person named on the account may default on debts. This means the funds could be subject to claims from their creditors.
• The other person named in the account may be involved in a separation or divorce. This could result in the funds being mixed up with their family property dispute.
• You cannot simply change your mind and remove the other person’s name from the account. Both account holders have equal rights of ownership to the account. Banking institutions will require the consent of both account holders to make changes.

When you die, a joint account transfers to the other account holder, not your estate. While this may avoid probate fees on the account, it may also be contrary to your intentions. This could lead to disputes.

For example, you may never have intended the funds to benefit only the child that was added as a joint account holder. You may have intended for all your children to share it equally or you may have intended it to be distributed according to your Will. In the event of a dispute, the courts may have to get involved.

The central issue really boils down to whether the joint account belongs to your estate or to the remaining joint account holder by right of survivorship. When courts are asked to make this determination, they will consider things like whether:

• one person was primarily responsible for funding the account
• the relationship between the account holders
• the joint account was intended as a gift to the joint account holder
• the joint account was intended to be part of a larger estate planning situation

When courts become involved, there is no guarantee what they will determine.