What to know about joint accounts PART2

Joint accounts with rights of survivorship Among joint accounts are those with right of survivorship. "There are really only two reasons to open such an account," says Daniel Goodman, president, CEO and chief investment officer of GFI Investment Counsel Ltd in Toronto. "It's really to plan for the estate and avoid probate fees, and also for ease of administration." Yet setting up a joint account with right of survivorship to avoid probate fees should be considered carefully. Undo challenges can occur when accounts are shared, such as issues with divorce or family feuds over estate decisions. According to Goodman, potential hazards can include: • Tax implications -- If the joint account is not with your spouse, there can be tax considerations in transferring the account. • Loss of control -- If you put your assets in a joint account, you have a potential loss of control. That new joint account owner must agree to any changes to the account, sales, etc., and you may not have given that a lot of thought. • Credit rating danger -- If one joint account holder has creditor issues and goes bankrupt, the other joint account holder gets pulled into that situation. The benefits of joint accounts According to Goodman, as people get older they risk losing their investment acumen and the fraudsters of the world prey on the elderly. One of the "great benefits of opening a joint account with one of your children" or a close relative, for example, is the added safety factor: "If a parent or grandparent is approached by a fraudster and says, 'Well, all my assets are set up with my son (or whoever), I will run this by him,' you usually get a click on the other end of the line," says Goodman. The bottom line: think twice Foresight and knowledge can go a long way in avoiding any joint account pitfalls. "Depending on the size of one's estate and what they're rolling into joint, people should at minimum speak to their accountant and quite possibly an estate lawyer," says Goodman. "I would strongly encourage people to think about the pitfalls, the loss of control -- these are things that people don't necessarily focus on enough."

What to know about joint accounts

A joint account can be both simple and complex -- from sharing a basic bank account to co-owning a big ticket item like a house or financial assets. In the first instance, a joint bank account can be a helpful tool in a busy household. Pooling funds into one account to cover shared expenses, such as groceries and rent or mortgage payments, can help in sharing costs and keeping track of expenses. In the case of joint accounts for property or financial assets, the situation is more complex and can have unexpected consequences. That's why being aware of the ins and outs of joint accounts is essential. First and foremost, every couple and family is different, so one size does not fit all when it comes to managing joint accounts. So, we tapped into the experience of two financial experts to share their collective insights. Why a joint bank account? When talking about joint bank accounts, Karin Mizgala, co-founder of Vancouver-based Money Coaches Canada, a national network of financial professionals, boils it down to three main characteristics: personal preferences, simplicity, and organization. Personal preference: "When you start having a joint account, it really depends on the stage of the relationship," says Mizgala, who is also a certified financial planner. "Hopefully you've decided that you're going to have ongoing conversations around money and that you're comfortable in working together on at least part of your finances." In many relationships, it's not an all-or-none decision when it comes to joint accounts. Mizgala thinks it still makes sense for people to have a separate account in their own name to be used at their personal spending discretion. Simplicity: For most couples considering a common account, Mizgala thinks a joint account that deals with the very obvious sort of simple-to-divide expenses is a good place to start: "Things to do with the house, which are often split 50/50, could easily be done through a joint account." Setting up a joint account for a dream trip can also be a helpful saving tool. Organization: If something should happen to one of the account holders, there is ease of access and keeping things organized. Despite the advantages of joint accounts, they should be considered with caution. "If you're joint with somebody and have signing authority on the account it means that they could deplete the account if they wanted to," says Mizgala.

Joint or Separate Accounts? That is the Question

It’s already another year and Valentine’s Day is around the corner again.  Last year, I talked about cohabitation agreements for Valentine’s Day (I’m so romantic, I know), so this year, I thought I would talk about “THE MERGE” of finances (or not).  A lot of questions about money arise when two people are living together as a couple under the same roof and sharing the same bills.  The decision to keep separate accounts or have all the bills and paychecks going into one joint account is different depending on each couple’s needs and wants.  Considering the fact that the major reason couples argue is all about money, this is a very important decision to make as a couple.

There are a lot of things to think about when deciding between one joint account or to have separate accounts.

Seeing as I haven’t made a pros and cons list in a while (and you all know I love making them!), I thought I would make one to highlight the options in order to facilitate better decision making.

PROS of a Joint Account:

• 
  Less hassle (money comes in, money goes out from one account)
• Less time needed to figure out the month to month expense tracking
• Can be considered the “epitome” of a united cohesive relationship, the “what’s mine is also yours” mentality and that is “our money” instead of “my money”
• Less confusing
• More egalitarian– if one spouse doesn’t make as much as the other spouse, the lower income spouse will benefit
• Will be easier to do taxes (I think…!)
• If you have one credit card linked to it, then that’s double the effort in collecting travel reward points

CONS of a Joint Account:

• There might be more squabbling about money– more decision making together about expenses.  I read somewhere that large proportion of spouses reportedly hide their big shopping items from their other spouse, so for this reason, one joint account might not be a good idea (unless you have EMT training)
• You can’t really surprise each other with gifts- all the expenses will be seen on credit card bills or with online banking
• This is somewhat trivial, but gifts to each other will seem kind of weird because you’re using the same pot of money…
• There might be some power-tripping if one spouse makes more than the other and contributes mostly to the joint account
• The spending style of each individual in the couple has to be considered- if one is a spendthrift and the other is a tight wad, a lot of arguing and disagreements are guaranteed to ensue
• If your partner is Spendy Mcspend, you run the risk of losing your share of the money (and then some) if they can’t control their credit card spending
• If all the money is put into one basket, it may be even harder to differentiate between money if youbreak up

PROS of a Joint Account in Conjunction with Separate Accounts

• You can maintain your individuality– like if he wanted to buy that 55″ TV with his own money, it’s not really my right to tell him not to (besides, nagging about money is not sexy)
• Different spending styles can be maintained, as long as the money to pay bills as a couple is available
• You can still maintain your credit score with your own account as a buffer
• It can be a good first step before joining together for one account

CONS of a Joint Account in Conjunction with Separate Accounts

• It can be a hassle to remember to deposit money from your own banking account to the joint account
• Depending on your banking plan, you may rack up banking fees (like for email money transfers, or too many transactions) over time
• Record keeping– so many accounts, so little time to keep track of them all
• If you make less then them (e.g. on maternity or paternity leave, unemployed, going back to school) it may be hard to keep money flowing into the joint account

So considering all these factors, what have we decided to do?

My boyfriend and I have decided to keep our separate accounts.  We opened up a joint chequing account that the mortgage payment and other bills will be paid out of.  We will each be paying an equal set amount of money regularly into the joint chequing account.  So far, it has been working out well, except for the hassle of remembering to transfer money from one bank to the joint account bank regularly.

I have a friend who had separate accounts with her boyfriend at first, and then they decided to cancel all the separate accounts and create one joint account together for the above reason- one would forgot to put enough money for the mortgage payment, and the other would forget the next month.  It was too much of a hassle for them.  They also got married too.

Another option that might work well is to have one MAIN joint account where the paycheques come in and where the payments go out (so it will be hassle free), and then pay yourselves automatically a set amount into your own separate bank accounts each pay cheque or whatever is convenient.

Whatever the case, communication and set rule and guidelines are key…Making sure you have the same values and spending styles before you get together doesn’t hurt too.

Readers, do you have joint or separate accounts with your partner/ spouse?  Which do you prefer and why?

Why are people reluctant to joint accounts?

There used to be a time in our relationship when I earned a bit more money than my other half. I was the breadwinner. Sadly, that's not the case anymore. His salary overtook mine at the start of this year and is set to carry on doing so, when he begins a promotion at his firm this autumn.

Except it's not sad, is it? After all, we're together, we spend money on each other - I will inevitably benefit from his career success with the odd meal out and cinema ticket here and there. Well alright, most meals out will be paid for.

What strikes me as remarkable, though, is that my husband is willing to share his good (small) fortune with me on an everyday basis: not just a treat every so often. Almost as soon as we got married, he selflessly applied for a joint bank account and beaming, presented me with my version of the 'his and hers' credit card. It had my new surname on it -the one that I still don't know if I'm taking officially - and all shiny and new, was begging to be used.

Only, 11 months on, I still haven't activated the card. Nor have I made plans for my salary to get paid into that account. I've basically just ignored it; carrying on using my trusty plastic that has been with me 

I feel guilty about this. True, this new credit card enables me to collect air miles on everything I buy (my husband has literally become obsessed with collecting air miles to the point where he upgrades flight seats and spends more money simply to collect enough air miles: go figure) but that wasn't his ulterior motive. There was a genuine sense of belonging and pride my other half felt when he handed me this card. It symbolised something: we are a couple, we are together, we are married, and now we share money.

Except, it's HIS money we'll be mostly sharing. He earns more than me, but we'll both be dipping into the same pot, which means when my contribution to the joint bank account is quickly exhausted, I'll inevitably end up using his dough when I'm out and about. And I just can't do that. I can't spend his money willy-nilly.

After years of being financially independent post-university, not to mention the years being brought up to look after myself, to manage my pocket money (oh yes, my dad encouraged my sister and I to keep 'budget' books when we were 10 years-old!), I'm finding the whole concept of a joint bank account rather bizarre. Maybe I'm worried, deep down, that giving up my financial independence is giving up a little bit of security in the knowledge that I can survive if I had to without anyone else.

But I think it's more that I just don't feel comfortable spending someone else's money on a whim: even after almost 13 years of being together, I don't want to take it for granted. This isn't the same as him treating me to a meal on a night out (yes please, more of those): it's essentially me dipping into his wallet whenever I feel like it. As I have some God-given right because I'm his wife?

I won't just be able to go and buy a pair of shoes on a whim whenever I feel like it. I'd feel serious guilt about spending our money when what is usually my guilty pleasure of a shopping spree.

But it's not just my spending I'll be worried about: it's his too. The minute you put money in a joint bank account, the minute it becomes OUR money, I feel I have a responsibility over it. It's no longer just his "pocket money" - I somehow suddenly have a say in it, it's our nest egg as a couple together. Everytime he or I spends from it, we're tapping into our future kids' college funds. I don't want that burden. Perhaps that's what this all boils down to: I don't want the responsibility.

All the while we keep our accounts separate, it allows me to carry on as usual. If I overspend, make mistakes in budgeting or decide to be especially frugal and live off baked beans to buy a new camera lens or whatever, then that's my decision, my fault. Equally, if he comes home one night having bought a new jumper, or a new bike - as he did recently - I think, 'wow, good for you treating yourself', not, 'hang on, that bike could have been the next three months' gas bills'.

There's something about a joint bank account I just cannot get my head around. I appreciate it's no new concept and many married couples have joint accounts and that works for them. But in this independent age of living, one which I've grown up in, it's suddenly rather odd to be asked to give up everything you know and act differently.

Joint accounts: A greek gift? PART2

Joint accounts for Universal Credit payments

If you and your partner are claiming Universal Credit, you’ll get a single payment for your household rather than individual payments for each of you. However, you don’t have to open a joint account for this payment to go into. Instead, you’ll be asked to nominate an account to have your money paid into and this can be either:

• A single account in either your name or your partner’s name, or
• A joint account in both of your names

Find out more in Joint Universal Credit payments for couples.

Opening a joint account

Opening a joint account isn’t so different from opening a normal current account. Each account holder just needs to fill in their section of the application form and provide proof of address and proof of identity.

During the application process, your bank should clearly explain:

• Who, if anyone, can take out money without getting permission from others on the account
• How overdrafts will be handled – typically, each account holder is responsible for paying back all the money owed and the bank may take money from someone’s sole account to cover the overdraft in the joint account
• How to handle disagreements or the end of a relationship between joint account holders

The formal agreement on who gets to do what with the account is called the mandate. All account holders have to sign the mandate when you open the account.

If things go wrong

How to handle disagreements with other account holders

If you’re having problems with your fellow account holders, cancel the mandate. This will freeze the account so no one, including you, will be able to withdraw money.

Your bank will only unlock the account once everyone agrees on how to split the money. And, if you can’t reach an agreement, the only option may be to let the courts decide who gets what.

The courts look at joint accounts differently depending on your relationship with the other account holders and where you live:

• Married couples or civil partners in England or Wales split the money equally, no matter who paid in
• For others in England or Wales, if only one person pays in, the money in the account is theirs
• In Scotland, the money belongs to whoever paid it in
• In Northern Ireland money is split equally unless a court rules otherwise

There can be exceptions, however, if you can clearly show that you and the other account holders intended to share the money no matter who paid in.

If your bank or building society goes bust

Just like other accounts, joint accounts are protected by the Financial Services Compensation Scheme (FSCS).

The FSCS savings protection limit for consumers will change on 1 January 2016 when a new £75,000 limit takes effect. In the meantime the existing £85,000 limit will still apply. The transition period will give you time to consider moving your money if you have more than the new limit in your account. If you do have more money than the new limit on 1 January 2016, some of your money will be at risk if your bank, building society or credit union fails.

For joint accounts, the FSCS assumes that each account holder holds an equal share. So, for a two-person joint account, you could deposit £170,000 - £85,000 each – and it would all be protected, assuming you have no other savings with the authorised institution.

Joint accounts: A greek gift?

Joint accounts

A joint account lets you manage any money you share with your partner, housemate or others. It’s really convenient for shared expenses, but there are always risks to giving several people control of a single account.

What is a joint bank account?

Did You Know?

Almost a fifth of married couples don’t use a joint account and of those who do, a third use it only for shared expenses and keep their own accounts for everything else.

Source: MoneySavingExpert, July 2011

With a joint bank account, two or more people are able to access the money in the account. Joint account holders can all pay into the account and pay bills, write cheques or withdraw cash (although sometimes more than one person needs to agree to this).

Joint accounts are mostly used by:

• Married couples, civil partners and couples who live together
• Housemates who have shared expenses

If you need longer-term access to someone else’s finances – for example, if you have an elderly relative who’s having trouble keeping on top of their money – a joint account is not your best bet.

Top Tip

If you have any doubts about whether to set up a joint account, don’t do it. Even if you want to split everything 50:50, you don’t need a joint account to do this.

• A straightforward way of sharing money and managing expenses, like bills and mortgage or rent payments.
• Some couples find that having a joint account – and having clear guidelines for how to manage it – can help prevent arguments about money.
• If one of you has a poor credit history, it’s not normally a good idea to open a joint account. Just living with someone, or being married to them, will not affect your credit rating but as soon as you open a joint bank account together you will be ‘co-scored’.
• You lose some privacy. If you use the account for personal expenses, the other account holders can see the transactions.
• If one of the account holders takes money out of the joint account, there aren’t many options for getting it back.
• If the account becomes overdrawn, each joint account holder is responsible for the whole of the money owing; so you could become liable for repaying the other person’s debt.

Joint bank, good idea?

If you've recently taken that next step in your relationship and increased your level of commitment to each other, say, by moving in together or getting engaged, you might be wondering if it's time to combine bank accounts. You're probably sharing a number of expenses and it might seem impractical to continue keeping tabs on who owes what to whom.

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While many couples do choose to combine their finances for convenience and simplicity, sometimes even married couples choose to keep all of their accounts separate. Here are some issues to consider if you're trying to decide whether opening a joint account is right for you at this stage in your relationship.

A joint account can be an addition

If you'd like to test the waters on joint banking, you don't have to empty out and close your existing accounts and pool your resources to form a new one. Instead, you can keep your separate accounts but also start a new, joint account. Each of you can contribute an equal sum to the account each month and you can use the account solely for joint expenses, such as rent and groceries.

Setting up this type of joint account does give you one more account to manage, but it can also simplify the payment of your joint expenses and let you test out whether you can trust your partner with access to your money. If they dip into the account for a purpose other than what you've agreed upon in advance, you and your partner might have a money problem and a trust issue.

Learn whether you can trust your partner

If you're looking for a long-term commitment, sooner or later you'll want to know whether you can trust your partner with your money. Establishing a joint account can be a good way to answer that question. Does your partner drain the account and run off with your money? If so, that's terrible, but it could be much worse if you were several years further along in your relationship and your partner was able to stick you with a mortgage and credit card bills in addition to draining your bank account.

If you have any doubts about your partner's financial trustworthiness, you'll want to give them access to your money in very small increments until they've established their credibility. If you doubt their trustworthiness, period, you should probably wait until they've proven themselves in other areas before trusting them with any of your money.

Discover your partner's spending habits and debts

If you do choose to go all in and combine your individual chequing accounts into one joint account, it will be difficult for your partner to hide his or her true spending habits or to keep credit card bills or other debt hidden. If you're lucky, your joint account will show that you have similar attitudes toward money and are both financially responsible, but often, one partner in a relationship is more of a spendthrift and the other more a saver. If that's the case, it's important to determine whether your different attitudes about money can be reconciled or whether they're a deal breaker. If you learn that your differences are irreconcilable, you can end the relationship with your overall finances still relatively separate and intact.

Joint finances aren't romantic

When both partners share a bank account, it's no longer possible to treat each other to gifts or dates since the money belongs to both of you. This reality can take some of the fun out of these activities. Also, discussing budgets and bills isn't sexy; it's mundane. If you're still in the new, thrilling, courtship stage of your relationship, you may want to postpone opening a joint bank account.

The bottom line

Opening a joint account comes with a lot of risks; the risk that you'll get ripped off, the risk that you'll kill the romance in your relationship, the risk that you'll find out you're not financially compatible with your partner. Every couple has to confront these issues eventually, but by considering when and how to combine your finances, you can minimize the risks and maximize the benefits.