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Whenever a bank opens a new savings or checking account for a customer, his or her name is listed as the sole authorized user of that account. If two or more individuals want to share access to the same account, however, they need to open a joint account. Any of the parties listed as a joint owner of the account can make deposits, write checks, or withdraw cash. In most cases, this type of account is opened by individuals with a close family or business relationship, such as parents and children, married or unmarried couples, or business co-owners. Some participants can restrict access by requiring two signatures on checks or withdrawal slips.
A joint account is considered to be riskier than two separate accounts, but many people find that pooling their income into a common account makes bill paying easier. Married couples with dual incomes may open an account together for routine expenses and individual accounts for other obligations. Elderly parents may consider opening an account with their adult children in order to pay household bills or to avoid probate court complications after death.
One aspect of a joint account is the right of survivorship. If two people open an account and one dies, the other party is usually entitled to the remaining balance of that account. Other types of individual accounts may be subject to probate court restrictions, which can keep much-needed funds out of the hands of survivors for months or years.
Those who open an account together should have the understanding that the other partner will always have the right to use all of the money in that account. This is why such accounts should be limited to people who have complete trust in each other. Both account holders need to keep track of current balances, deposits, and outgoing expenses. All parties can be held liable for overdrafts and bounced checks, unless one party is restricted by the "two-signature" requirement.
Young couples considering marriage or living together need to discuss the pros and cons of this type of banking because a joint account carries more risk than individual accounts. If one party has substantial loan obligations or automatic deductions, the other party sharing the account should be comfortable with the situation. Creditors view a joint account as they would an individual account, so funds can be legally deducted even if only one party actually owes the debt. An elderly account holder should also be comfortable with the fact that the other party can withdraw all of the funds at any time without prior notice. These accounts work best when both parties have established a solid level of trust between them.