NEW DELHI: A joint account is like a shared bank account between two people or more, with most banks allowing up to four people to be the joint account holders. It has several benefits, one being it allows easy access to money through debit cards and online banking. Additionally, it simplifies bill payments and helps track expenses.
For couples, financial experts recommend having three accounts. Each partner maintains their own individual account where their income goes, and they transfer a predetermined amount to a joint account regularly. The joint account is used for shared expenses like rent, utilities, groceries, and entertainment. It can also be used for saving money together, such as for emergencies, vacations, or future goals.
Having individual accounts allow personal spending and saving without needing to consult the partner every time. It’s important to trust each other when depositing money into a joint account, as all account holders have equal rights and can close the account if needed.
Overall, getting a joint account can help couples manage their finances, build trust, and work together towards shared financial goals. Joint accounts can be opened with your parent, spouse, sibling, child or even a business partner.
Kinds of joint accounts
When you open a joint account at a bank, there are some important things to know. Each person has the right to deposit, withdraw, and manage the money in the account. Even though one person may have more control over the account, all account holders have equal rights to the money once it’s deposited.
It’s also important to trust the other account holders because anyone can close the joint account if they want to. This means that when you deposit your hard-earned money into the joint account, you need to trust that the other account holders will handle it responsibly. The way a joint account is operated can be decided by the account holders. There are different options to choose from:
Joint: All transactions in the account must be approved and signed by all the account holders. If one of the account holders dies, the account will be closed, and the bank will pass on the balance in the account to the survivor.
Joint or survivor: All transactions in the account must be approved and signed by all the account holders. If one of the account holders dies, the survivor can continue to operate the account.
Either or survivor: If there are two account holders, either person can operate the account. If one of the account holders passes away, the remaining balance and interest will go to the survivor.
Former or survivor: In this case, only one person, the former, can operate the account while they are alive. After their death, the survivor can take over. If the survivor dies first, the account will be operated solely by the former, and the legal representative of the survivor won’t have access to the account.
Anyone or survivor/s: If there are more than two account holders, any of them can operate the account. If one of the account holders passes away, the remaining balance and interest will be given to the surviving account holders.
These mandates can be changed with the agreement of all account holders.
Additionally, if someone wants to authorise another person to operate the account on their behalf, they can give a mandate or power of attorney to the bank. For fixed-term deposits, instructions can be given about whether to close the account or renew it when it matures.
Pros and Cons
Joint accounts have both advantages and disadvantages.According to Jitendra Solanki, a Sebi-registered investment advisor, “Benefit of Joint account is ease of accessing money when in need. Also, it helps couples to track their cash flows well when expenses are planned jointly. Ideally couples when planning their finances can open a joint account to manage expenses like loan, EMIs. Even NRIs are now allowed to open a joint account with a resident Indian.”
But while opening a joint account, you may be exposing yourself to litigation and even financial shock. What if one of your partners in the joint account defaults on a loan or indulges in illegal activities leading to seizure of the joint account. “Joint accounts can be complicated for income tax filing and divorce. It will be cumbersome to find money trail for tax purposes from a joint account,” Solanki added.