Should you share a joint bank account with a spouse or partner? It’s a good question to consider, but there is no one-size-fits-all answer. Circumstances differ across families, and there are different types of joint accounts with varying features and benefits. Here is a quick primer on the different types of accounts, along with the main benefits and drawbacks of sharing an account with another owner.
Types of Joint Accounts
There are a few different types of joint accounts.
Joint with rights of survivorship (“JTWROS”)
In this type of account, both account holders are equal owners and have a claim to the entirety of the account. If one of the account holders dies, then the full value of the account passes to the surviving account holder. This is the type of joint ownership currently offered through Personal Capital Cash.
Joint tenants in common (“JTIC”)
Unlike the previous type of account, a JTIC is typically set up when there are unequal interests in the account and there are no rights of survivorship. For example, person A might contribute 60% to the account, and person B only 40%. If person A dies, then his or her 60% share does not pass to person B, but instead to person A’s estate. Personal Capital Cash does not currently offer JTIC accounts.
This is a special type of joint account that is often established for elderly people or those who delegate their finances to someone else. In this account, the primary holder grants an agent the authority to write checks, pay bills, deposit money, or perform other basic functions. However, if the primary account holder dies, the agent does not inherit the remaining assets — they go to the account holder’s estate. Personal Capital Cash does not currently offer convenience accounts. These are only available in certain states.
The Benefits of a Joint Account
If you’re sharing household finances with someone else, a joint account makes paying bills and keeping track of spending much easier. It also simplifies budgeting and allows you to clearly see the effect of monthly cash flows on your overall financial situation.
Since both owners can see everything going into and out of an account, there is no ambiguity around who is responsible for each month’s spending and saving.
Save on fees (maybe)
Some banking and brokerage accounts charge annual or transaction fees on an account level. By combining their finances into a joint account, two people can pay a single layer of fees instead of two. (Note: Personal Capital Cash does not charge any account fees)
This is arguably the biggest benefit of joint accounts. In a JTWROS, one partner’s death means the assets automatically pass to the other account holder. This allows the surviving partner to completely bypass the probate process, which can be lengthy (up to a year or more) and potentially expensive (depending on legal fees).
The Drawbacks of a Joint Account
Lack of privacy
Transparency is listed above as a benefit, but it can also be a drawback if you’d rather not share all the details of your finances.
Both account holders have full ability to withdraw or spend from the account, so there is no stopping your partner if you disagree with him or her on a purchase. Your money is their money, and vice versa.
Potential for abuse
The above point goes not just for open disagreements; if the other account holder decides to empty the account and skip town, there is nothing you can legally do to stop it.
Joint accounts are a perfect solution for some families, and completely wrong for others. The answer for you depends on your specific situation, what features you value, and what you’re looking to accomplish. Knowing how these accounts work, and what you can expect, are the best ways to make the right decision.