How to put restrictions on joint bank account
PEOPLE find joint bank accounts convenient. They allow spouses to pool money for common expenses, while an elderly person might rely on a joint account to enlist the help of adult children with finances. Making someone a joint owner typically means providing complete access to the account, including the ability to empty it on demand. Those who feel wary about the risk can choose to include restrictions when the joint account is first opened.
Those who want to restrict a joint bank account can restrict survivorship, require dual signatures, open a restricted account or use a joint convenience account.
No right of survivorship
In most cases, every joint account holder equally owns the money. This means that the death of one account holder leaves the survivor with all of the account’s funds. Such accounts are called joint tenants with rights of survivorship – JTWROS for short.
The prospective account holders can also open it as a tenancy-incommon account to restrict survivorship on a joint account. Each person would only own part of the account, either equal or unequal shares, depending on what the owners specify up front. In the event of death, an owner’s share is left to whoever is named in his will.
Requirement of dual signatures
To restrict each account holder’s ability to independently withdraw funds or to close the account, the owners can open a joint account that requires two or more signatures for withdrawals, depending on the number of account holders. The paperwork would link the names in the account with the word “and” rather than “or.” Printed cheques might say, “Jane and John Jones.” This requirement won’t prevent a determined account holder from raiding the account by way of an Automated Teller Machine card, however, or even a cheque because banks process most cheques automatically, without a signature cheque.
Tenancy by the entirety
Some banks offer a restricted account known as tenancy by the entirety. Only married spouses can create such a bank account. Although the particulars of these accounts can vary, a creditor of only one owner-spouse cannot generally go after funds in the account. The account features the right of survivorship and may require two signatures for withdrawals.
Joint convenience account
An owner can open a joint convenience account or add someone to an existing account as an authorised signatory if he wants to grant someone the ability to conduct transactions on the account but not give him ownership of the funds. This is called a power of attorney, and it gives the appointed person the right to manage your affairs.
A power of attorney is often used when an elderly individual needs assistance paying bills or when a couple will be out of town and they require help managing their affairs while they are away.
The signatory might also be referred to as an agent.
The signatory’s account access ends when the account owner revokes permissions or dies. There is no right of survivorship because the authorised signatory was not an owner of the account, nor can the signatory’s creditors go after the funds. A convenience account may also be used where a signatory already has power of attorney over the account holder.
Co-signer versus co-owner of bank accounts
Having a bank account can make purchases and bill-paying more convenient. It may also permit you to receive direct deposit from your job. You can open a bank account in your name alone or with another person. Whether that person signs up as a co-signer or coborrower will determine his obligations on that account.
A co-signer is someone who agrees to be financially liable for a debt if the borrower does not pay it. For bank accounts, this debt may include overdrafts, bounced cheques, unpaid maintenance fees and other fees that occur on the account. If the account holder racks up fees on the account and does not, or cannot, pay them, the bank will expect the co-signer to cover the debt. A co-signer does not have to be a relative, but must be someone who agrees to take on that degree of responsibility.
A co-owner is a joint account holder. All signers on a joint account have equal liability for the account. This liability is present the moment the account holders sign for the account. If the behaviour of one of the account holders leads to an assessment of fees on the account, both parties are still responsible for payment of that debt. Which party incurred the liability is irrelevant. Joint accounts are often used by married couples and others who want to pool their finances.
The bank views a co-signer and co-owner differently. The responsibility of the co-signer kicks in only if the account holder defaults. If the account holder maintains the account in good standing and pays any fees incurred on the account, the bank will have no expectation that the co-signer take any action on the account. A co-signer has limited liability for the account, unlike a co-owner, who has full liability for the account and all charges associated with it.
A co-owner usually has greater access to the account than a cosigner. The co-signer generally does not have access to make deposits and withdrawals from the account, serving as more of a guarantor. This becomes especially significant when it comes to the funds held within the account. A joint account owner can make deposits into a joint account. Also, he can generally withdraw or spend the money in that account, even if he was not the person who deposited the funds into it. Once the money is in the account, joint account holders generally have equal access to it.
•L-R: Plateau State Accountant-general, Mr Cyril Tsyenyil; Commissioner for Finance, Dr Regina Soemlat; and Commissioner for Budget and Economic Planning, Mr Sylvester Wallangko, during the 2020 budget breakdown in Jos... on Tuesday.