New Delhi: Scores of people opt for joint bank account, especially the couples, parents and adult children, or even business partners. Prior to opening a joint account, the applicants should understand certain things before signing the bank form, so that no differences arise between the two persons. In this article, we inform you about the points which account holders should take into consideration.

When joint bank account, the bank asks the account holders as to how it should be operated. ‘Either or survivor’ means that either person can operate the account independently. The joint account is convenient for partners, but it also means that either of the account holders can withdraw the entire amount. ‘Jointly’ means both signatures are required for transactions. This increases control but reduces flexibility.

Understanding Joint Bank Account Operations

In a joint account, both account holders are equally responsible. Both the beneficiaries are accountable if there is any issue such as an overdraft, a loan linked to the account, a bounced cheque, or outstanding charges.

If the account is misused, both the account holders’ credit profiles get affected. This becomes even more important when joint accounts are linked to credit facilities.

People often assume that a joint account means equal ownership of the money. However, courts or tax authorities see it from different perspective. Income earned from money deposited in a joint account is usually taxed in the hands of the person who deposited it.

Tax, Inheritance, and Dispute Resolution

From an inheritance perspective, it is not compulsory that ‘survivor’ access would always override legal succession laws. In selected cases, surviving family members may still have a claim. A joint account is usually used for operational convenience; it is not automatically an estate-planning tool.

From the time of opening the joint account, both the account holders should decide how expenses will be managed.

If a joint account has to be closed if there is a change in relationship, the consent of both parties, depending on the mode of operation are required. If there is an disagreement between the two, banks may freeze the account until the dispute is resolved. This can become complicated if essential payments are made through it. It is not wise to keep all savings in a single joint account.