What is a Joint Account
A joint account is a bank or brokerage account that is shared between two or more individuals. Joint accounts are most likely to be used by relatives, couples or business partners who have a level of familiarity and trust with each other, as this type of account typically allows anyone named on the account to access funds within it. There are multiple ways accounts can be established, each with its own implications for how money or assets can be accessed within the account or how the contents of the account are handled after one of the joint holders passes away.
BREAKING DOWN Joint Account
Joint accounts can be established on a permanent basis, such as an account between a couple into which their salaries are deposited, or may be temporary, such as an account between two parties who contribute funds for a short-term purpose. Joint accounts may be very helpful to newer couples who are at the relationship stage of combining their finances. Bank accounts that are held jointly between two parties may be titled with an "and" or an "or" between the account holders' names. If the account is "and," then both/all parties must sign to access the funds. If it is "or," then only one of the parties needs to sign.
Joint Account Rights
There are several titling mechanics that designate how the fund will be divided if one of the parties on the account passes away. These options are required on brokerage accounts.
- JTWROS (Joint Tenants with Rights of Survivorship). If one of the parties passes away, the assets in the account pass by the rule of law (outside of probate) to the surviving parties.
- TIC (Tenants in Common). Tenants in Common allows for each joint holder of the account to designate their own beneficiary for their portion of the assets in the event they pass away. Instead of transferring by the rule of law to the second account holder, the assets are passed to the beneficiary. In addition, the assets may not be automatically split 50/50. The TIC designation allows the tenants to divide ownership of the property any way they choose.
- Joint Tenants "JT TEN" option. Selecting this mandates a 50/50 split of the assets.