Financial institutions such as banks, credit unions and trust companies may offer customers the option to set up a joint account. When the phrase “joint bank account” or “joint account” is used in this brochure it refers to joint accounts at any of these financial institutions.
What is a joint bank account?
Joint accounts are bank accounts in which two or more people have ownership rights over the same account. These rights include the right for all account holders to deposit, withdraw, or deal with the funds in the account, no matter who puts the money into the account.
How does a joint account work?
As a joint account holder, you share equal access to the account and responsibility for all the transactions made through the account. In most cases, unless you state otherwise, the other account holder can make transactions without your consent.
In some cases, it may be possible to specify that the consent of all joint account holders is required to access the funds in the account.
In many cases, joint accounts include the right of survivorship. This means that if one of the account holders dies, the surviving account holder becomes the owner of the account, with the right to deposit, withdraw, and deal with the funds in the account.
However, in some cases this could be challenged by others who may think they have an interest in the money in the account as an inheritance. The surviving joint account holder may have to demonstrate that the deceased account holder intended the remaining funds be a gift to the joint account holder. This could potentially lead to delays in the surviving account holder being able to access funds in the account.
Find out how joint accounts work at your financial institution and ask about what happens if a joint account holder dies. Make sure you fully understand all this information before making any decisions.
Why set up a joint bank account?
There are many reasons why someone may consider opening a joint account. For example, couples may set up a joint account to pay household bills or deal with other shared expenses. This is one of the most common uses of joint accounts.
In some cases, joint accounts may be considered as an option for someone to get help from family members or friends to pay bills and manage their finances.
For example, health conditions or mobility issues could make it difficult for someone to manage their personal banking on their own. Getting to the bank or using online banking services can be difficult for some people. A person may consider setting up a joint account with a family member, such as an adult child, after the death of a spouse who used to deal with the household finances.
It may also be important to consider other consequences of a joint account such as whether probate fees or taxes will apply upon the death of a joint account holder or whether the remaining funds are intended to form part of the deceased’s estate or be gifted to the surviving joint account holder. These considerations may be addressed in consultation with a lawyer.
Risks of a Joint Account
Control over the joint account
- Unless you are able to state otherwise in your banking agreement, any person named on the joint account is able to withdraw money from the account at any time. They don’t need permission from you to do so, even if most or all the funds in the account were deposited by you.
- Funds withdrawn may never be recovered.
- If the relationship between you and your joint account holder breaks down, you risk the money being withdrawn or that the account may not be handled in the way that you wished.
- If your joint account holder and their spouse separate or divorce, the money in the joint account could be claimed in the separation or divorce settlement.
- It is difficult to hold a joint account holder legally accountable for taking money from the account that they weren’t supposed to.
- You may have to go to court to challenge the actions of a joint account holder. This could be expensive and stressful. It may also take a long time to resolve.
- If it is not clear that the money in the account was meant to be a gift to the surviving joint account holder or whether it was meant to become part of the deceased joint account holder’s estate, legal disputes could arise.
- Legal disputes can be expensive and difficult to resolve.
- You will share responsibility with your joint holder for all transactions made through the account.
- If one of the joint account holders has financial problems or declares bankruptcy, creditors could make claims on the money in the account.
Removing someone from a joint account
- The bank may require both people named in the joint account to give approval to remove one of you from the account.
What to consider before setting up a joint bank account
Discuss the risks and benefits of a joint account with people you trust
- Do you understand how a joint account works?
- Do you understand that your joint account holder will have equal ownership of the account with you? This means they will have the right to withdraw and use the money in the account even if you deposited all the money.
Meet with a financial advisor to find the right banking options for your needs
- Have you met with a financial advisor to discuss different types of accounts, and what will work best for you?
- If you are having difficulty with in-person banking, have you considered pre authorized deposits and bill payments from your own account, instead of opening a joint account?
Is the person you want to name as joint account holder trustworthy?
- Has this person always been open and honest with you?
- Have you known this person long enough or well enough to feel that you can trust them?
- Is this person able to act in your best interest? Do they have any personal issues that may interfere with them properly managing your finances?
How much control will you have over the money in the account?
- Have you discussed with your financial institution if there are ways to keep some control over withdrawals from the account?
- Are you able to put any restrictions on the account (e.g. putting restrictions on cheques written from the account)?
- Have you considered setting up online banking alerts to be notified when there are withdrawals or other activity on the joint account?
- Are you able to check the account statements regularly?
What if something happens to one of the account holders?
- Speak to someone at your financial institution or a lawyer to find out what happens if you or your joint account holder dies or if one of the account holders loses mental capacity.
- Consider including information about your joint account in your will, so that your wishes are clear.
Consider all your options
Even though setting up a joint bank account may seem to be a convenient option to get help managing your finances, there are many risks involved. Carefully consider all the risks and get information about all the options available to you before making any decisions.
If you prepare a detailed Power of Attorney that gives your attorney the authority to access specific bank accounts, they will be able to help you pay your bills and manage your finances.
With a Power of Attorney document, you can limit what your attorney is allowed to do. With a joint bank account, you may not be able to limit what your joint account holder can do with the money in the account.
There are also mechanisms in place to hold an attorney accountable if they mismanage your finances or do not manage your money in the way that you directed them to in the Power of Attorney document. It is very difficult to hold a joint bank account holder accountable for the mismanagement of money in the account.
Where can I find more information?
For more information on Powers of Attorney and joint bank accounts, contact knowledgeable professionals in your community, including legal aid services or associations that offer public legal education and information. You may also want to speak with a lawyer, an estate planner, or someone knowledgeable at your bank, credit union or trust company.
Powers of Attorney and joint bank accounts are not the only financial planning tools available. If you become incapable of managing your own finances and property, and you do not have a Power of Attorney or joint bank account, each province and territory has laws that allow someone else to get legal authority to manage your finances for you.
For information on other seniors-related issues, visit seniors.gc.ca, your local Service Canada office, or contact your provincial or territorial government.
This document has been jointly prepared by the Forum of Federal, Provincial and Territorial Ministers Responsible for Seniors. The Forum is an intergovernmental body established to share information, discuss new and emerging issues related to seniors, and work collaboratively on key projects.
Québec’s participation in the development of this document was aimed at sharing expertise, information and best practices. However, Québec does not subscribe to, or take part in, an integrated pan-Canadian approach in this field and intends to fully assume its responsibilities for seniors in Québec.