The pros and cons of joint accounts (2024)

How joint accounts work

A joint account is very much like a regular chequing account. The difference is that it belongs to two or more people.

Joint accounts aren’t just for couples. While many people opt for a joint account with their partner, it’s also possible to open one with someone else. You could have one with the co-owners of your family cottage, for example.

Generally, all the account holders will have the same rights. They can all deposit and withdraw money and carry out other transactions without permission from the other holders.

Good to know: It’s possible to set up safeguards.

You can opt to require two signatures for cheques and withdrawals. In this case, you wouldn’t be able to have a debit card for the joint account or carry out transactions online. Though this is less convenient, it’s useful if you want to monitor all the money going out of the account.

The benefits of joint accounts

You may find it useful to open a joint account if you share bills with someone else. It’s easier than saving your receipts and trying to split everything afterwards.

You can use it to pay joint expenses, such as:

  • Electricity bills
  • Mortgagepayments or rent
  • Family activities
  • Family vacations
  • Your children’s school supplies

Joint accounts aren’t just a handy way for couples (and others) to manage shared expenses. They’re also a practical tool for saving.

You can use your account to put money aside for a project (home renovations, your wedding, a vacation, etc.)

Your financial institution may require you to have a joint account if you want to buy a home with your partner. This account could be used to make your mortgage payments.

Best practices for managing joint accounts to avoid disputes

Experts often recommend that couples contribute to the joint account in proportion to their income.

This means that if one partner earns 60% of the household income, they should make 60% of contributions to the joint account. This encourages a more equitable division of shared expenses and reduces the risk of the lower-earning partner being disadvantaged financially.

It’s important for couples to discuss their values and priorities.

To avoid any misunderstandings, they should agree from the outset what the joint account will be used for. Drawing up a budget will give you a clearer picture of the money going into and out of the account.

By following these tips, you can enjoy the financial benefits of living together and reduce the risk of disagreements.

The disadvantages of joint accounts

Because you share ownership of the joint account, you have less control over spending. Trust and solid communication are essential to avoid problems.

In the event of conflict or separation, it’s recommended that you close your joint account quickly.

Good to know for Quebec:In the event of death, the surviving co-holder or executor may receive the funds according to the established distribution.For accounts opened before December 8, 2022 - or after, provided the shares for each have not already been determined - the distribution of shares is presumed to be divided equally, i.e. 50/50.If the spouses or former spouses holding the account wish to change this distribution, they will have the opportunity to do so by completing a declaration at a branch.

In light of this, it’s a good idea to have a personal bank account too. This ensures that you won’t lose access to all your funds at what is already a difficult time.

In the other provinces and territories: Joint accounts include a right of survivorship. This generally means that the surviving account holder becomes the sole owner of the account, and the deceased’s estate doesn’t have access to it. The money that was shared now belongs to one person.

Opening a joint account with someone in financial difficulties

If your partner has financial problems, sharing a joint account could raise some issues. Here are a few examples:

First off, if your partner has a poor credit score, this can negatively impact your own score. The basic principle is that you share both the rights and the responsibilities over the account.

  • If your co-holder uses the account irresponsibly, you will have to deal with the consequences too.

For example, you’ll also be responsible for any fees related to insufficient funds, even if you didn’t carry out the transaction that caused the problem.

  • If there’s a line of credit linked to your account, you’ll also be liable for the debt.

You’re responsible even if it was your partner who spent the money.

  • Creditors may apply to seize funds in the account to be repaid.

The account may be frozen and a portion of the funds given to the creditor.

In the event of bankruptcy, however, the licensed insolvency trustee will determine the share of the jointaccount belonging to each co-holder. Only the bankrupt person’s share can be seized.

Factors to consider before opening a joint account

Before you combine your finances with another person, in whole or in part, here are some questions to ask yourself:

  • Is your future co-holder trustworthy?
  • Do they have any personal problems (issues with drugs or gambling, financial difficulties, etc.) that might lead them to make poor decisions with respect to the joint account?
  • What is their financial situation like? How about their credit score?
  • Do you feel comfortable with the way joint accounts work and the responsibilities involved?
  • Will you be able to check your account statements regularly to spot any irregularities?

There are many ways to manage your finances, and it’s important to find the method that suits you best. If you think that a joint account is right for you, you’ll find all the information you need to open an account here.

Would you like to discuss this with us? Contact your National Bank advisor or your wealth advisor atNational Bank Financial. Don't have an advisor?

Make an appointment

Would you like to discuss this with us? Contact your National Bank advisor or your wealth advisor at National Bank Financial. Don't have an advisor?

Make an appointment

The pros and cons of joint accounts (2024)

FAQs

The pros and cons of joint accounts? ›

Pros and cons of joint bank accounts

“Each account holder can see transactions and have access to joint account balances, allowing for budgeting transparency.” However, joint accounts aren't right for every couple, especially if you have different spending habits.

What are the pros and cons of a joint bank account? ›

Pros and cons of joint bank accounts

“Each account holder can see transactions and have access to joint account balances, allowing for budgeting transparency.” However, joint accounts aren't right for every couple, especially if you have different spending habits.

What are the problems with joint bank accounts? ›

Cons of joint bank accounts

Co-owners on the account are both responsible for fees, such as overdraft charges. If one holder lets debts go unpaid, creditors can go after money in the joint account. Both holders can see transactions in the account, which can present privacy issues.

Can you still withdraw money from a joint account if one person dies? ›

Joint bank accounts

If one dies, all the money will go to the surviving partner without the need for probate or letters of administration. The bank may need the see the death certificate in order to transfer the money to the other joint owner.

What is good about joint account? ›

Open a joint bank account with someone and you'll both be able to manage it, which can be useful for household bills and pooling your cash. However, any money you pay in will then belong to you both, so only do it with someone you trust.

Who owns a joint account when one person dies? ›

Joint bank account holders generally have the right of survivorship, which grants the surviving account holder ownership of the entire account balance. The surviving account holder retains ownership regardless of which owner contributed the money, and the account doesn't go through the probate process.

Can one spouse freeze a joint bank account? ›

If you're worried your spouse may withdraw all the funds, you might contact the bank, let them know that you are divorcing, and request that they freeze the account so that neither of you can clean it out. Ask your divorce attorney about informing your spouse that you have put a freeze on the account.

Should my wife and I have joint bank accounts? ›

After all, pooling one's resources seems to make a marriage happier and more stable—something most couples want when they first say “I do.” “Couples do seem to be happier when they have a joint account, at least for those first two years of marriage—and possibly later, too,” says Olson.

Is it better to have joint or separate accounts? ›

Couples with a strong, unified vision for their financial future might lean toward joint accounts to foster collaboration and shared responsibility. Conversely, those who value independence or have significantly different financial goals may prefer separate accounts to maintain autonomy.

Is a joint bank account a good idea for a couple? ›

Previous studies have shown a link between holding a joint bank account and having a higher quality relationship. Perhaps couples with a shared account might prompt each other to consider how their purchase will affect their partners or might facilitate transparency around finances.

Should I be added to my elderly parents bank account? ›

You could jeopardize your parent's financial security if you have financial challenges. For example, creditors can take the money in the joint account as collateral to settle your debts. Additionally, the funds in the joint bank account can also affect your eligibility to qualify for college financial aid.

Do joint accounts avoid inheritance tax? ›

Estate Tax Consequences

If the surviving joint owner is not a spouse, then the fair market value of the entire account will be included in the decedent's estate. If the surviving joint owner is the surviving spouse, then only 50% of the fair market value is included in the value of the decedent's estate.

Who owns the money in a joint bank account? ›

The money in joint accounts belongs to both owners. Either person can withdraw or spend the money at will — even if they weren't the one to deposit the funds. The bank makes no distinction between money deposited by one person or the other, making a joint account useful for handling shared expenses.

How much money is safe in a joint account? ›

Under the FSCS, the first £85,000 (as of January 2017) a depositor puts into their account (or £170,000 if your money is held in a joint account) is protected in the event that the bank or building society goes bust.

Are joint bank accounts the secret to a happy marriage? ›

However, research from MarketWatch Guide shows that joint banking could lead to fewer arguments and increased relationship satisfaction. According to the study, 55% of couples who use solely joint bank accounts claim they never fight about money, compared to only 39% of partners who have personal accounts.

What are the disadvantages of opening a joint bank account? ›

Loss of Financial Independence: One of the significant drawbacks of a joint account is the potential loss of financial independence. Both account holders have equal access to the funds, which means you may need permission for significant financial transactions.

Should husband and wife have a joint bank account? ›

After all, pooling one's resources seems to make a marriage happier and more stable—something most couples want when they first say “I do.” “Couples do seem to be happier when they have a joint account, at least for those first two years of marriage—and possibly later, too,” says Olson.

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