Tips from a Money Coach: Joint Bank Accounts

Should I open a joint bank account with my spouse or ex?

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Janet Gray is a money coach/financial planner in Ottawa. She previously shared on our blog how money coaches can help during separation. Janet also helps couples manage their money.  Her tips in this post about joint accounts apply equally to all couples, from newly married to divorced.

Joint bank accounts offer convenient money management for many different types of relationships, mostly for married and cohabiting couples, as well as adult children and their parents, or businesses. But the convenience of joint bank accounts comes with a potential cost that couples need to consider before signing up.  Consider these five issues before you open a joint bank account with a spouse/partner.

There is no accountability for withdrawals

You hope that your bank account partner will be as financially responsible as you are. You are already probably sharing a home and other expenses. It’s in both of your best interests to make this work because the results affect you both. But if one person is unreliable with money, or planning to leave the relationship suddenly, a joint account can be dangerous for the other account holder. Both account holders each have every right to withdraw money from the joint account.

Joint accounts are vulnerable to the financial mistakes of both owners

If either account owner has unpaid debts that go into collection, the creditor has every right to use the joint account to satisfy those debts. This means you might potentially find your joint account completely drained in order to pay off debts you are unaware that your co-owner has run up.

In addition, if there is a legal judgment against either account owner, the money in the joint account could be considered part of the assets awarded in the judgment. For instance, if one account holder is sued, then the assets in the joint account are considered part of either person’s asset even if one holder contributed all or none of it.

A joint account could hurt your credit

Although your spouse’s credit rating can't ding your credit score, the way they handle their money can hurt your credit if you share a joint account with them. Since creditors are required to report joint account information, an account holder who struggles with debt and paying bills on time will negatively affect the co-owner's credit rating — unless and until the money behaviour improves.

A joint account can affect eligibility for financial assistance

If either account owner needs to qualify for any kind of financial assistance, the money in a jointly held account is included in the eligibility calculations for the financial assistance. That means you might end up giving up your ability to qualify for the financial assistance if your account co-owner holds more cash in the account than you would on your own.

Your co-owner can close the account without your permission

Some banks require consent from both parties to close a joint bank account - but many don’t. You may have to do it in person at the branch. Typically, any person who can write cheques on the account can close it, at any time, regardless if their co-owner is present or even aware.

The benefit to this is if one party relocates, passes away, or otherwise becomes incapacitated, there are very few issues the remaining co-owner must go through to close the account. The danger, however, lies in the potential for one co-owner to simply deplete the funds, close the account, and disappear. Always make sure you're sharing a chequing account with someone you trust.

This issue can be remedied easily. Your account can require signatures to be ‘either/or’ or ‘both’.  With ‘either/or’ it takes just one signature, but ‘both’ requires both account holders to sign.

Janet's Number One Tip:

Yes, open a joint account with your partner - but always have your own account too.

Our Tip:

Have an open conversation with your partner and consider putting a prenuptial agreement or cohabitation agreement in place.  You can agree with your partner how joint accounts will be used and treated.  While this does not protect against third parties, it can protect you from your partner making unexpected decisions about your shared funds.  (Thinking about a prenup but not sure how to talk to your spouse about it? Read this post.)