Problems with Joint Bank Accounts
- Personal joint bank accounts are normally set up with survivorship rights. This means that if one owner dies, the other assumes full control of the funds. Without the survivorship provision, banks normally split the account between the surviving owner and the deceased owner's estate. Trying to determine what percentage of a joint account belongs to the survivor and how much belongs to the estate of the deceased often leads to complicated legal battles in probate court.
- Legally, both owners on a joint account have equal access to deposited funds. Some elderly people add friends or relatives to their accounts to assist with day-to-day management of funds. However, once an individual has access to an account, he can withdraw funds as he pleases. Many instances of elderly abuse and fraud begin with people adding co-signers to their accounts. You cannot remove a signer from an account if you dislike the way he handles the funds.
- The Internal Revenue Service can levy on the bank accounts of people who owe back taxes. Legally, neither the account owners nor the banks can stop this process. The IRS does not consider which owner funded the account. Someone could have had an existing account for many years with a high balance before adding a relative as a co-signer. The IRS, and in some instances the creditors of the new signer, could deplete those funds to settle the new signer's debts.
- Many joint account owners have problems balancing their accounts because each has a checkbook, debit card and Internet access. Many people cannot notify each other every time they use the account to make a withdrawal or a purchase. If both owners make numerous transactions on the same day, it could send the account balance into the negative. Banks assess per item overdraft fees, which typically range from $25 to $38 dollars. These fees can cause the overdraft situation to exacerbate.
