A joint bank account in New York state, while providing benefits of convenience, also has some disadvantages and risks. These negative attributes mostly stem from the fact that each account holder has a 100 percent legal ownership interest in the total account and there is an automatic right of survivorship. This creates problems with control of the money and exposure to unexpected legal liabilities and tax risks.
Full Ownership Rights
Each owner of a joint bank account has a 100 percent legal ownership interest in all the monies in the account. While the account is opened, either of the joint account holders can withdraw or use up to the full account balance and without the advance knowledge or permission of the other account holder. This is true even if the owner who withdraws all of the money never put any money into the account at all.
Right of Survivorship
A New York joint bank account automatically has the right of survivorship. This means if one of the account holders dies, the surviving account holder will automatically become the full and sole owner of all the funds in the account. This usually will still occur even if the deceased's will specified the money to go to someone else or if the account holders got a divorce. The surviving account holder can not waive or negate this ownership transfer, even if it will cause him some sort of harm or liability.
Since a joint bank account is legally 100 percent owned by each account holder, that makes all the money in the account subject to the legal liabilities of both owners. Therefore, the unpaid creditors of either of the account holders can move to legally freeze or seize the full bank account, even if one the account holders has nothing to do with the debt involved. This can happen not only regarding private or business creditors, but also for government debts and alimony and child support payments.
Taxes and Benefits
Many people open a joint bank account so that the surviving owner can receive the money without the costs of a will and probate procedure. However, if the surviving account holder withdraws over a regulated amount of money in a year from the account, he may be liable to pay gift taxes on the money. This can be true even if the money is distributed to other people. All of the money in a joint bank account can count as an asset of the account holder who applies for a government benefit program, even if he never made any deposits into that account. This could make him ineligible to receive these benefits.