A joint tenancy checking account is a great idea for people who want to share financial responsibilities. It can be shared between spouses, business partners, or family members. This type of account allows all named individuals to access and manage the money, making it easier to pay bills, share expenses, or save for joint goals.
What Is Joint Tenancy?
Joint tenancy is when two or more people share ownership of something. It could be a bank account or a piece of property. It is an arrangement that allows the beneficiaries of a particular account to access it.
In this arrangement, if one person dies, the other person automatically takes over the account or property without going through legal processes in court. Joint tenants in common assets are popular among couples and business partners.
Each person can be listed as an owner of things like bank accounts, investments, personal properties, or real estate. When couples or business partners are joint tenants with rights of survivorship (JTWROS), the surviving person becomes the sole owner after the other person’s death.
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Understanding Joint Tenancy With Right of Survivorship
Joint tenancy with rights of survivorship (JTWROS) is an account that two or more people own. Each tenant who owns this type of account has an equal share of it. When one person dies, the others automatically get the deceased person’s share.
Married couples or business partners often choose this type of account because they do not have to worry about the property after one person dies. Usually, when someone dies, their will goes through a legal process called probate.
The courts check the will to see if it is legal and decide how to divide the person’s property or pay off their debts. The legal process can get more complicated if the deceased individual does not have a will. This is because the court has no clear instructions about what to do with the deceased’s property.
The disadvantage of the probate process is that it can take a long time. This means it might take a long time before the beneficiaries receive the property. JTWROS is different.
When one person dies, their share immediately goes to the surviving co-owner. This can be a significant advantage because it saves time and lets the other person access the money or property immediately. However, it is essential to understand both the good and bad sides of joint tenancy before making this choice.
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Advantages of Joint Tenancy
A joint tenancy checking account has several benefits, especially for people who share finances, such as married couples or business partners. Joint tenancy checking account benefits include the following:
- Shared Access: Both account tenants can access money, write checks, and make withdrawals. Since each tenant can handle transactions, this makes it easier for partners to manage shared expenses, including bills or business costs.
- Simplicity in Case of Death: If one tenant dies, the surviving partner automatically takes complete control of the account. There is no need for complicated legal processes like going through probate court to transfer funds.
- Convenience: Since the people involved in a joint tenancy have full access to the account, it will be more convenient for managing daily expenses, such as groceries or business payments. They do not need the approval of the other people involved every time.
- Financial Backup: If someone is unavailable, sick, or traveling, the other person can still manage the account and pay for necessary expenses without disruption. It helps provide flexibility and financial security in times of emergency.
- Equal Responsibility: Both account holders who own assets are equally responsible for whatever happens to the account. This means that the individuals involved are responsible for the assets, and they will share both the good and bad parts equally. If the property increases in value, the people involved will benefit from the proceedings.
If there are debts or loans, they will also all pay for it equally. This also means no one can take out the loan on the property without making other people responsible for paying it back. Likewise, if you make profits and increase the value of the assets, everyone involved will enjoy the proceeds.
Drawback of Joint Tenancy: What to Consider Before Opting In
The following are the disadvantages of joint tenancy and things you must consider before opting in:
- Managing Relationships and Joint Tenancy: When two people share ownership of an asset, it can become problematic if they don’t have a stable relationship. Neither party can decide on the assets if a couple or business partners do not get along. The rule was created to protect both people from being taken advantage of. However, it can also complicate things if they can’t agree on what to do.
- Frozen Bank Accounts: A probate court can sometimes freeze joint bank accounts. This can happen if one of the joint tenants dies and has many debts. The court might be worried that the surviving partner will empty the account to avoid paying those debts. Another reason an account might be frozen is if there is a significant disagreement about whether both people contributed to it. Generally, if both people acted fairly and honestly, the account is less likely to be frozen.
- Losing Control Over Assets: Another disadvantage of joint tenancy is losing control over the final distribution of assets. A surviving partner may lose control over what happens to the property or assets if the other person involved dies. The surviving partner can sell or give the property to someone else, meaning the deceased has no say on what happens to their share of the property after death.
- Tax Implications: Joint tenancy with rights of survivorship has significant tax consequences. There are estate taxes, capital gains tax, and gift taxes. The application of these taxes depends on the situation. For example, adding someone as a tenant may trigger gift taxes, depending on the property’s value. Capital gains tax may apply when a surviving owner sells an asset. Also, any income from the property may be reported and taxed by both owners based on their share.
In conclusion, the best joint tenancy checking account depends on each tenant’s needs. Some examples of these accounts include Capital One 360 Checking, Ally Bank Joint Checking, and Chase Total Checking. But ensure you do your due diligence before using any of them.