Joint Checking Account Laws
There are a certain number of laws, rules and regulations that apply to joint owners of a checking account. Some may not be beneficial, depending on your goals and objectives. Being a joint owner means you could incur certain liabilities that were initially meant for the other owner. Before you open a checking account with a joint owner make sure you know all of your rights and responsibilities. For the most part, joint owners have the same level of authority and responsibility.
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Equal Rights
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If you open a checking account with a joint owner, either owner, without having the other owner present, can withdraw all of the money from the checking account and then close the account. The bank will not be liable for the money taken. The account owner withdrawing the money is now free to open another account in his or her name only. It's a good idea to have a joint owner you can trust.
Legal Liability
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If one of the owners is being sued by a creditor and the bank account is attached with a bank levy which freezes all or a portion of the money in the account, neither owner will have access to the money. Clear communication between owners is important so everyone involved will know what's going on concerning the checking account. This can inconvenience someone, especially if the money is needed right away.
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Survivorship
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If one of the owners dies the remaining funds are left to the sole survivor. The owner on the account will have access to the funds which also keeps the funds from being turned over to the estate and going through probate. When money goes through probate it can be tied up for quite a while before anyone can take possession of it. Having a joint owner avoids confusion and legal finagling. Some states require the account have the stipulation of joint tenancy with right of survivorship if you want to avoid probate.
Estate Taxes
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If an owner of a checking account adds another owner to the account, the balance of the account, when the primary owner dies, will be added to other assets for purposes of estate taxes. This will hold true even if the checking account is able to avoid the probate process. It can still be used to calculate the estate taxes.
Death Certificate
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If one of the owners of a checking account dies the surviving owner should take the death certificate to the bank to have the deceased owner removed from the account. The account will then be titled to the surviving owner's name. There will not be a need to get a new account number; everything will remain the same and the surviving owner can continue to use the account, including the issuance of checks to pay debts.
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