Should you open a joint bank account?

Regardless of your life stage, there's a good chance you can speak to the convenience of a joint bank account. Married couples, business partners, and aging parents being supported by their adult children can all benefit form a joint bank account.

But as with most financial tools, care is required to balance the pros with the cons. If you're thinking of opening a joint bank account, read on for a list of considerations that will help you determine which route is best for you.

What is a joint account?

Joint bank accounts are traditional checking or savings accounts, except they're owned by more than one person. Each owner can make deposits and withdrawals, thus each owner can spend the money in the account.

Opening a joint bank account is similar to opening an individual account. Each account holder usually needs to provide a photo ID, Social Security number and some personal information like their address and birth date.

But here's the real answer to the question of what you need to open a joint bank account: the right partner. Combining your money with someone else's raises the stakes in your relationship, so the decision to open a joint account is not one to take lightly. You and your partner must carefully weigh the benefits and risks against your needs and goals.

Benefits of joint bank accounts

Spouses, domestic partners and business partners often find joint checking accounts useful for managing shared expenses like rent, utilities, groceries or supplies.

By combining your money, you and the joint account holder may meet minimum account requirements more easily and access benefits like higher savings interest rates or waived fees.

Sharing an account can encourage transparency and accountability between the account's owners. Since everyone has full access to the account's transaction records, there's no option to hide expenditures or withdrawals. Plus, it's easier to budget when all transactions are in one place providing a clear picture of each other's spending.

Partners and family members who are saving for a common goal may encourage each other to save by contributing to a shared account. Whether saving for a down payment on a new home or vacation, it's easier save when you have support — and accountability.

Disadvantages of joint bank accounts

Trust is required if you're going to open a joint bank account with someone. Even if you're certain your partner won't empty the account, there are other risks.

Owning a joint account with someone who's in significant debt can expose your assets to their creditors.

Co-owners of joint bank accounts must be open and honest about their shared funds and spending habits. This also applies to joint accounts between those who are romantically involved.

Common life events affecting joint account holders

Some partners appreciate the peace of mind that comes from using a joint account for shared expenses and maintaining separate accounts for personal spending and saving.

Separating or divorcing couples can find it easier when their money isn't combined in joint accounts but keeping money separate has its own risks like when a spouse or partner dies.

When a person dies without a named beneficiary or joint account holder, their money in the individual account is subject to probate. Probate is the process by which local courts process their will and distribute their assets.

If this happens, the family might not have access to necessary funds to pay for things like funeral costs, medical bills, or other immediate expenses.

Joint ownership can, in some cases, prevent additional stress and financial strain in the event of a loved one's death. Fortunately, there are a few types of joint ownership that are useful in estate planning to keep assets out of probate.

Common types of joint ownership

A typical shared bank account where each owner has equal access is a joint tenancy with rights of survivorship (JTWROS). The surviving account holder maintains control of the account after one owner dies. The funds remain accessible and are not subject to probate.

Tenancy by entirety (TBE) is a type of ownership recognized that only applies to married couples and is only recognized in some states. With a TBE, each spouse owns an equal share of the property and equal rights to decide what happens to it.

The assets are transferred to the surviving spouse when one of them dies. This type of ownership is often used for asset protection, as it helps protect assets from debts incurred by one spouse while the non-debtor spouse is living.

Joint tenants in common is a type of joint ownership in which two or more parties share ownership rights, but the ownership doesn't automatically pass to the surviving owners upon one party's death. Each owner can specify how they want their share of ownership to pass via a will or payable on death arrangement. Ownership in the account may also be in unequal amounts.

With certain types of account ownership not being allowed in all states, some financial institutions may not recognize all types of ownership registration due to the complexities involved in administering such accounts. Be sure to check with your bank or credit union to see what type of ownership registrations they do allow.

Which is better? Joint account or single account

A joint account could be a good idea in these scenarios:

1. A high schooler just got their first summer job.
2. A newlywed couple opens a joint account for managing monthly expenses and saving to buy a house together.
3. After falling victim to a scam targeting senior citizens, elderly parents open a joint account so their adult daughter, whom they trust, can help monitor their account activity.
4. Longtime associates who own a business together share a joint business account with a bank that offers business banking, so they can both pay bills in the other's absence.

Separate bank accounts may be the best options in these scenarios:

1. A young, unmarried couple agrees to save money to cover the first and last months' rent on a new apartment.
2. Two domestic partners have lived together for years but are both self-employed and prefer to maintain financial independence.
3. Two colleagues start a business together. One partner brings the business savvy and the bulk of the initial investment, while the other brings vast technical expertise but has struggled financially and previously declared bankruptcy.
4. Long-term partners plan to get married soon but have different spending habits and amounts of debt.

As you can see, both separate and joint accounts have their place in your financial life. The key is to understand the risks of each and make the decision that's best for you.

The USAA Advice Center provides general advice, tools and resources to guide your journey. Content may mention products, features or services that USAA Federal Savings Bank does not offer. The information contained is provided for informational purposes only and is not intended to represent any endorsement, expressed or implied, by USAA or any affiliates. All information provided is subject to change without notice.