Joint accounts help in many situations, by jointly concentrating earnings and expenses in a single place, you make it easier to manage your household budget or company financials. This comes as each holder enjoys full right to withdraw, deposit, and manage the funds. However, joint accounts are not hassle free, can complicate and generate financial and legal liability and moreover can contain multiple pitfalls you must be aware of from the beginning.
Sensitive drawbacks include, inter alia, exposure of all account holders to actions taken by any one, complicate tax filings and divorce proceedings, impact benefits by inflating reportable assets and so forth. When you have a joint account with others, their problems often become your problems. Bank fees as in case of overdrafts are applied to joint account balance regardless of who triggers them, and creditors of any account holder can seize the balance by Court even if other holders have no part in the debt.
Joint accounts may also complicate your tax situation as all owners pay some tax. If the account earns interest, you may be held liable for the income produced on the account in proportion to your ownership share. Also, in some places, withdrawals exceeding certain percentage per year by a joint holder may be treated in certain way that subject you to tax.
If account holders are married, a divorce can change how your joint account to be handled. By law, in certain countries, divorce automatically dissolves rights of survivorship on a joint account. In others, the account remains as it is unless and until one or both holders close the account or change the terms. This means a divorced couple could continue to have equal access to an account if they intend. However, acute bitter cases came up.
After the death of account holder(s), some banks complicate the running of accounts. I know, a widower who suffered for years due to conflicts between family members and the bank. No doubt, preserving interests of the deceased client is of paramount importance but the other living account holder is also a client entitled to same privileges, if not more.
Understanding all terms of the joint account is unequivocally vital. Don’t close your eyes and sign, your signature may act against. You have the right to delete, add, amend or otherwise, if necessary.
Dr. AbdelGadir Warsama
LEGAL COUNSEL
Email: AWARSAMA@WARSAMALC.COM
