Joint checking accounts offer account holders a number of benefits but, they also come with some potential risks.  A joint account subjects the account holders to risks involving loss of funds, credit exposure, and survivorship rights issues.

The risk of loss due to account mishandling by the other account holders is one of the biggest risks with this type of account ownership.  Each joint checking account owner has full control of the account without regard to whose money was deposited in the account or whether the other owner agrees with the purpose of a withdrawal.  Either joint account owner may withdraw the entire balance and wrongfully refuse to repay the other what is rightfully due. 

One account holder with a joint checking account has the potential to become liable for repaying the other person’s debt.  If the account becomes overdrawn, each joint account holder is responsible for the whole payment along with any bank fees and third party charges that may be incurred.  If one of the account holders has credit accounts at the same bank that fall in arrears, the bank can also use the money in the joint account to offset the past due debt. 

Risk of financial loss can also be the result of actions that take place outside of the joint checking account.  The money held in a joint checking account can be subject to both people’s creditors.  Court orders and legal orders against one account holder can freeze the funds in the entire account and the bank account balance may be seized to recover any money owed.

Questions and complications also may arise regarding survivorship after the death of one of the account holders.  If there is a right of survivorship with the joint account, the assets in the account will go entirely to one account holder when one person dies.  The money in a joint checking account will go directly to the other joint owner of the account and not to the people named in your will or heirs

Signing up for a joint bank account is often convenient and necessary, but all individuals involved should be aware the potential costs as well as the benefits before opening a new account.

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