Joint Checking Account: How It Works and What You Take On
Bills Bottom Line
A joint account has multiple owners. Each owner can generally withdraw, spend, or move the money without the other’s permission. If the other owner's creditor sues and wins a court judgment, it could take money from the joint account, including yours. How much of the balance belongs to each of you depends on your state.
Table of Contents
- What is a joint account, and how does a joint checking account work?
- What are the pros and cons of a joint checking account?
- Who can open a joint checking account together?
- How to open a joint checking account
- Can a creditor take money from a joint account for one owner's debt?
- Can you remove someone from a joint checking account or close it?
- Bills Action Plan
- Key Terms
You're about to put your name on a checking account with someone else. The other owner might be a partner, a parent, an adult child, or a person whose bills you help pay. Opening a joint account gives you one common place to pay bills.
The thing to find out is whether the other owner's overdraft, debt, or court judgment becomes your problem too. Start with what each owner is allowed to do with the money.
What is a joint account, and how does a joint checking account work?
A joint account is a bank account with more than one owner. Each owner has an equal legal right to use the money, even when it all comes from one owner's paycheck.
Neither owner needs the other's permission to deposit or withdraw. In most circumstances, either owner can also close the account without the other’s permission.
You may be able to use all the money, but that doesn't necessarily make it all yours. State law determines how much of the balance belongs to each of you.
What happens to the money when one of you dies depends on the account's title, the way you agreed to hold it. Most joint accounts are held with rights of survivorship, which means the money passes to the surviving owner. Some are titled as tenants in common instead. With that title, your share goes to your heirs when you die, as your will or your state's law says.
A joint savings account works the same way: equal access, and no permission needed.
What are the pros and cons of a joint checking account?
A joint checking account gives both owners equal, unlimited access to the money. This can work for you or against you.
| Pros | Cons |
|---|---|
| You pay shared bills from one account. | Your co-owner can withdraw money without your permission. |
| You and your co-owner can check what comes in, what goes out, and which bills were paid. | You might be charged overdraft fees if the other owner overspends. |
| With most joint accounts, the money passes to the surviving owner when one owner dies. | Your co-owner’s creditors can try to collect from the shared account. |
Who can open a joint checking account together?
Two people can share a checking account whether or not they're married or related.
Should couples get a joint checking account?
A joint checking account suits a couple who want one place for shared bills and who trust each other with the whole balance.
You give up control over what your partner spends. You’re both equally responsible for the account's activity, including overdrafts and other fees. A joint account might not be the right move if you disagree on how to spend your money, or your spending habits are miles apart.
One strategy is to keep your individual checking accounts and only use a joint account for monthly household expenses. Each of you can transfer money into it every month. The amounts don't have to match. What’s important is that you and your partner agree on what to contribute.
Can you open a joint account with someone you are not married to?
You don't have to be married or related: an unmarried couple, a parent and child, or roommates can open a joint checking account. Many banks let unrelated people open one.
Unmarried couple. Each of you has equal legal rights to the money, regardless of who deposits it. In some states, the law treats a married couple's joint account differently from yours. A smart strategy is to agree in writing how you'd divide the money if you split.
Parent and adult child. The child becomes an owner, and rights of survivorship could send the money to the child, regardless of what the parent's will says. An alternative is a convenience account, also called an agency account. The child can deposit, withdraw, and write checks without owning the money. Ask your bank whether it offers one.
Caregiver or helper. The helper becomes an owner, so a creditor with a court judgment against the helper may try to seize the account. The alternative is a power of attorney, which lets the helper act for you while the account stays in your name only. Ask the bank what it needs to accept a helper under a power of attorney.
A helper on a convenience account, or an agent under a power of attorney, can still withdraw the money.
How to open a joint checking account
You may be able to open a joint checking account with your co-owner at a branch or online. Each of you gives the bank your personal information and identification, such as proof of address, a government ID, or a Social Security number.
The bank uses these to confirm each owner's name, date of birth, address, and identification number. Without a Social Security number or an Individual Taxpayer Identification Number, you may be limited to an account that pays no interest. One of you may also need to make a $25 to $100 opening deposit.
Ask the bank these questions before you start:
- Does the online application require both you and your co-owner?
- Do you and your co-owner have to appear in person?
- Do both you and your co-owner have to sign the account agreement, and can you sign electronically?
Can a creditor take money from a joint account for one owner's debt?
Yes, it can. If your co-owner is sued over a debt and loses, the creditor can go after your joint account, including money you contributed. The creditor must win a court judgment against that owner. The creditor can then get a garnishment, a court order that tells the bank to turn over money from the account. If your co-owner owes a court judgment, consider keeping your own money in a separate account in your name alone.
How much of the account a creditor can reach
State law decides how much of a joint account belongs to the debtor. Under one approach, the court treats the whole balance as the debtor’s unless both co-owners prove otherwise. Under another, both owners are assumed to own equal shares. It comes down to proof of how much each of you put in.
The bank may freeze the account until it's decided who owns what. If your account is garnished, you must be sent a notice. If it doesn't reach you, ask your co-owner or the bank for it. The notice explains the court procedure for getting money released by claiming an exemption, a legal protection for some of the money. A judge decides whether the creditor gets the money. If no one claims the exemption and proves it, the creditor gets the money.
Social Security and other federal benefits
Federal benefits such as Social Security that arrive by direct deposit stay protected in a joint account, up to two months' worth. The bank must total the benefits directly deposited in the last two months, for either owner, and keep that amount available. For example, if $3,000 of the other owner's benefits and $4,000 of yours arrived in that time, $7,000 is protected. Money beyond that amount can be garnished.
Tax debts and IRS levies
Government agencies work differently from other creditors: they can sometimes take money from a bank account without a court order. A tax levy is when the Internal Revenue Service (IRS) seizes property to pay a tax debt. If your co-owner owes the tax and can withdraw freely from your joint account, the IRS could levy your account.
Your bank freezes the money when it receives the levy. Your bank then has a 21-day waiting period before it acts on the levy. If the tax debt is your co-owner's, call the IRS as soon as you learn of the levy. Explain why the money is yours. The IRS may ask for proof of ownership.
If your co-owner files for bankruptcy
If your co-owner files for bankruptcy, the part of the account that legally belongs to them becomes part of the bankruptcy case. State law determines the split.
Before your co-owner files for bankruptcy: Ask a bankruptcy attorney (who represents you, not your co-owner) how your deposits would be treated and whether you can keep using the account.
Can you remove someone from a joint checking account or close it?
You can usually close a joint checking account by yourself. Removing the other owner is harder: in general, they have to agree.
To remove your co-owner, you generally need their consent, even during a divorce. Some banks may offer accounts that let you remove them without consent. Afterward, as long as the account is open in both names, you could still be responsible for any fees.
To remove your name, ask the bank what it requires, because the rules vary by bank and by state. Ask whether the other owner has to sign. Afterward, ask the bank in writing whether a negative account balance could still affect you.
To close the account, ask the bank. Either owner can usually do it alone, though some banks want both signatures. The bank may require you to settle an overdrawn balance first. If you close an account but still owe a balance, the bank will bill you. An unpaid balance could end up at a debt collection agency.
In a divorce, get advice before you move a large amount. You often have the right to move the money, but state law may protect your spouse.
Bills Action Plan
- Find out how the account is titled. Ask the bank whether the account carries rights of survivorship. Ask what each owner can do alone, too.
- Keep a record of whose money goes in. Save your deposit records. If the IRS levies the account for your co-owner's tax debt, it may ask for proof that the money is yours. If your co-owner owes a court judgment, consider keeping your own money in a separate account in your name alone.
- Reroute deposits and end automatic payments before you close or leave the joint account. Open an account in your own name first. Reroute your direct deposit to it. Enable automatic payments on your new account. Leave enough in the joint account to cover checks that haven't cleared. Then ask the bank what it requires to remove you as an owner or close the account.
Key Terms
Joint account: A bank account with more than one owner. A joint account usually lets each owner withdraw money and keep what's in the account if the other owner dies.
Right of survivorship: A feature of most joint accounts. When one owner dies, the money passes to the surviving owner.
Power of attorney: A legal document that allows someone else to act on your behalf. The bank account can stay in your name only while the person you name as your agent helps with your banking.
Bank levy: A seizure of money from a bank account to pay a debt. For a tax debt, a levy is a legal seizure of your property to pay the debt. For other debts, the court procedure is usually called garnishment. Some states call that same procedure a levy. So for a debt that isn't a tax debt, levy and garnishment can mean the same thing, depending on your state.
Garnishment: A court order that tells your bank or credit union to turn over money from your account. A debt collector has to sue you and win a judgment first.
Bankruptcy estate: All of a person's interests in property at the time they file for bankruptcy. The estate includes property another person owns or holds, if the filer has an interest in it.
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Who pays if a joint checking account is overdrawn?
You might be charged overdraft fees on a joint checking account when the other owner overspends. For the overdrawn amount itself, the model banking law every state has adopted says you aren't liable for an overdraft from a check you neither signed nor benefited from. Your state's version may differ in detail, and your account agreement may say more, so ask your bank whether it makes each owner responsible for the full negative balance.
Can I add someone to my existing checking account?
Yes, you can add someone to an existing checking account. Adding them turns your individual account into a joint account. The new owner can usually withdraw money while you're both alive and usually keeps the account if you die.
Does a joint checking account affect your credit score?
A joint checking account usually doesn't affect your credit score because checking account balances don't appear on your credit report. An exception is unpaid bank fees: once your bank turns them over to a collection agency, the fees appear on your credit reports and could hurt your scores.
Is a joint account FDIC insured for each owner?
If your bank fails, Federal Deposit Insurance Corporation (FDIC) insurance covers a joint account for each owner, up to $250,000 per owner. Two owners of one joint account have coverage on up to $500,000. The limit applies to each owner's share of all the joint accounts held at that bank, added together. This only applies if your bank participates in FDIC.
Is a joint savings account different from a joint checking account?
Ownership of a joint savings account works the same way as a joint checking account. Each owner has the same access to the money, and neither needs the other's permission to deposit or withdraw. Both of you have equal legal rights to it, regardless of who put it in. FDIC insurance counts them together: your share of all the joint accounts you hold at one bank, checking and savings, is added up and covered up to $250,000. You usually can't remove your co-owner from either kind of account without their permission.