Joint Checking Accounts: What to Know Before Opening One

At many stages of our lives, it’s convenient to have a joint checking account. Consider these scenarios:

Your child is going off to college, and with a joint account, you can move money in and out for related expenses: tuition, rent, books or food.

You get married or establish a domestic relationship with a significant other and want to merge finances to pay your household bills.

You’re older and want someone to help you manage your money or to grab your mail and pay your household bills while you take off to see the United States by RV.

You’re going into business with a friend, and both of you will need access to money to get the venture up and running.

Under circumstances such as these, it seems like a good idea. But before you add someone else to your financial accounts, it’s wise to understand some of the risks associated with it.

Money for All

Once you open that account and pool your funds, the money belongs to both signers on the account. You deposit $900 and your co-account owner puts in $100, but you no longer own 90% of the money. Tomorrow, the other party could withdraw all $1,000, legally.

Both people on the account have the rights of ownership and can make a withdrawal, or transfer funds to accounts held only in their names, at any time and without an accounting of where the money went. Your son can take $300 of that money to buy books or to throw a party in his college apartment.

Tip: Deposit just as much money as your co-owner needs to pay the bills if you fear the money might be spent unwisely.

Right of Survivorship

With joint ownership comes the right of survivorship. A joint owner will always have immediate access to funds in the account, and this holds true if one of the account holders passes away.

In most instances, that is advantageous. If your spouse, for instance, is listed as joint owner, he or she won’t have to wait for an estate to be probated or life insurance to be settled to have the money to make the next mortgage payment.

But what if the co-account holder isn’t the person you would want to have access to your funds? What if your business checking account has $100,000 in it and you’d want your spouse to have what you consider to be your half of it? That surviving spouse has little recourse; the money in the account legally belongs to the joint owner.

Tip: Be sure you truly consider opening up a joint owner account with someone you wouldn’t want getting (or taking) the full amount. For business partners, speak with your financial adviser about the best way to structure your accounts.

Risk of Loss

While joint account holders usually are close family members or partners, that doesn’t mean you know all there is to know about the other person’s finances.

Say, for example, you’re a senior citizen who wants to establish a joint account with your adult son or daughter. Your money could be at risk because of their financial issues.

Unpaid credit card bills, for instance, could wind up going into debt collection and later, a court could issue a judgment allowing your joint account holder’s bank accounts to be levied. Another person’s debt could wipe out your funds.

As could a divorce. For example, if you add your adult daughter to your checking account—and you put all of the money in it—it is still considered one of her assets. So if she divorces, her spouse could seek a share of the money in that account, even though no marital funds went into it—leaving you out a lot of money in a divorce settlement.

Tip: A power of attorney that can give children access to a parent’s money in case of illness or incapacitation might be a better option than a joint account. That would limit access to an emergency.

Tax Issues

Deposits placed into a joint account could be subject to a tax under many circumstances.

A gift, defined by the Internal Revenue Service, is “any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return.” The exceptions are gifts that don’t exceed the annual allowable amount ($18,000 in 2023), gifts to a spouse, gifts to a political organization, or tuition or medical expenses paid on someone else’s behalf.

Therefore, if you deposit $50,000 into an account that doesn’t belong jointly to your spouse, you could be considered the “donor” and might need to pay a gift tax.

Tip: When you intend to open a joint account with someone other than your spouse, and the deposit is more than $18,000, consult with your tax adviser first.

You could have the best of intentions when you open a joint checking account, but the unexpected could happen, and you could wind up losing your money if your joint owner is not someone you trust. It’s always wise to ask a lot of questions before making this financial commitment.

How to Add a Joint Owner to Your Quorum Checking (or Savings) Account

To add a joint owner to an existing Quorum checking or savings account, download and complete a Joint Ownership application here.

Please fax the completed, signed form to (914) 641-3730, Attention: Operations Department. You can also mail it to us at: Quorum Federal Credit Union, Attn: Operations Department; 2500 Westchester Avenue; Suite 113; Purchase, NY 10577; or send it as a secure message within online banking.

A joint owner can also be added when you request a new account to be opened.