Bank accounts that are held jointly by two people are known as joint accounts. They simplify the process of managing a couple's finances by allowing both partners complete access to the account and the ability to add or remove funds according to their own requirements. In light of this, canceling a joint bank account when it is no longer helpful to either party is a financially savvy move that one can accomplish with a minimum of hassle. If you are aware of when and how to close a joint account, you will be able to end your own account with little to no difficulty.
Causes to Discontinue the Use of a Joint Bank Account
If you have a co-owner on the account who is inattentive or obstructive, or if you simply no longer require it, terminating the account is the best course of action to take (your banking needs to be changed or the relationship ended, for example). In scenarios like these, it may be pretty tempting to keep an account active even if you cease using it, but it is in your best interest to close any joint accounts as soon as possible. Doing so can safeguard you in a number of different ways.Prevent Penalties
When a shared bank account is closed, the co-owner is prevented from making irresponsible use of the account, which eliminates the possibility of accruing overdrafts and other costs. If you close your account, the other person who shares ownership of the account may try to spend more money than there is in it. In the event that the bank covers the transaction on your behalf, the balance of your account will become negative, and you may be subject to an overdraft fee. In order for you to close the account, you must bring down the amount on the account to zero.Minimize Fees
When you shut a shared bank account, not only do you stop paying monthly maintenance fees, but you also stop being charged inactivity fees. This way, you won't end up paying for something you're not going to use anyway.Reduce your risk of legal repercussions
Even if you are the only one who uses the account regularly and you have complete faith in the other person, legally speaking, joint account holders own the funds in the account on an equal basis. In the event that a lawsuit is filed against another account holder, for example, because of unpaid debts or an accident involving a vehicle, creditors may have the right to seize your funds.Establish a Fresh Start
Whenever a romantic relationship comes to an end, it's best to put the past in the past and move on. Eliminating unpleasant reminders and providing emotional relief are two benefits that can result from closing an old joint bank account.Take Away Completely Shared Access
When you have a joint bank account, each account holder has the ability to transfer money and even shut the account. Consequently, one person can spend all the money in an account without permission from the other account holders. That is helpful for busy families and business partners who want to run their operations as effectively as possible, but things can grow more problematic when partnerships dissolve. When two people own a shared account, they may feel more financially independent from one another if they close the account. Find out how the other people who have money in the account will respond if you go ahead and do something without consulting them before you close it or withdraw money from it.Procedures for the Closure of Joint Bank Accounts
The procedure for closing an account is different for each financial institution. Even though some financial institutions mandate that both account holders provide their approval before adding or removing a signatory from a joint account, the vast majority of financial institutions permit either account holder to shut a joint account on their own. Reading the terms of your account agreement will help you determine the best way to close your account, as some services restrict you from closing it through inconvenient methods. The agreement you have with your bank regarding your account will include the process you must follow to seek the closure of your account. There are a few different ways in which you might be able to shut a joint bank account, including the following:Online
It is possible to close a joint account online with certain financial institutions, either by using an automated system or by sending a message to the bank's customer care department while you are signed in to your account. It is possible that in order to close the account, both of the account holders will be required to log in to their respective accounts individually.Phone
Calling a company's customer care department representative and terminating your account over the phone can be an option.In-person
When one of the account owners has to physically go to a branch to submit a signature to shut the joint bank account, this is the condition that causes the most inconvenience. If that's the case, make sure to have some form of identification with you and give yourself plenty of time to finish the process. In most cases, only a single person is required to shut a joint bank account, and that individual might be either co-owner of the account.Instructions in Detail on How to Terminate a Shared Bank Account
There are potential adverse outcomes associated with closing the account. Should things not go as planned, you risk missing payments, having checks bounce, and incurring expenses that are not essential. When changing banks, make sure you complete this checklist to avoid any unpleasant and expensive surprises:1. Bring the remaining balance on your account to zero
Deposit funds to make up for any shortfall, or determine how you would like your bank to disperse any remaining money in the account upon its closure and let them know how you would like it done. You can generally wire money and mail checks through the services provided by banks, or you can transfer the money on your own.2. Put an end to the withdrawals
Make sure that any checks that are outstanding have been cashed and that your account has been closed on time to avoid incurring unnecessary and costly overdraft fees. Cancel any payments that are set up to be made automatically for bills. Conduct research into the events that have occurred over the past year so that you don't forget anything. When you close your joint bank account, you should get rid of any debit cards and checks that are associated with it to avoid making any mistakes.3. Get ready to use your new account
Create a new account for yourself if you don't already have any open. You'll need to be able to use the new account to accept payments, make purchases, make payments on bills, and keep cash on hand. Do not be in a hurry to cancel the previous account until at least one month has passed since you correctly redirected your payments to the new account; this means that you should not close the old account prematurely.4. Make a request to your bank to have the old account closed
Find out what the conditions are, such as who is allowed to seek the closure of the facility and how you should communicate your request. The next step is to present an identification document together with any forms that may be required and file a request to terminate the joint account.Staying Out of Legal Trouble
Any person can remove all of the money from a shared bank account without obtaining permission from the other account owners. This is because each account owner typically has complete access to all of the funds in the account. This may result in two significant problems:It's possible that you don't have a legitimate claim to the money you keep
This may still be the case despite your financial institution authorizing you to take out cash and cancel the account. For illustration purposes, a divorce decree may state that a former spouse is entitled to a certain amount of money.Without your knowledge, the co-owner can deplete the funds in your account
If you don't trust the other person who is listed on your joint account, you should talk to an attorney in your area about the different ways you can protect yourself. The more you communicate with the other person, the more likely it is that you will reduce your legal fees. If it's at all possible, you should talk about how to divide the money in a joint account so that the situation doesn't get any worse.Frequently Asked Questions (FAQs)
How can I delete my name from a bank account that is held jointly with another person?
Taking your name off of the account is the only way to ensure that you will not be held jointly responsible for any future commitments. Remember that even if you remove your name from a joint bank account, you will still be responsible for any overdrafts that occurred while you were a joint owner of the account, even if you remove your name from the account. You have the option of requesting a form from the bank in order to give up your rights to the account.Who is responsible for filing and paying income taxes on joint bank accounts?
Owners of joint bank accounts are equally responsible for paying any income taxes that the account may charge. This is a simple matter for married couples who file their taxes as a joint return. When business partners or other individuals share bank accounts but do not file joint tax returns, the burden of paying income tax should be divided in proportion to each individual's percentage of ownership in the account.