Joint accounts are very popular in the Indian community. Many people choose to open a joint account as it makes it easier to reach financial goals when you pool money with trusted people. If you are someone who is looking to open a joint account, then we’ve got you covered. In this article, we have listed all the benefits and risks involved with joint accounts and the various types of joint accounts.
What is a Joint Account?
A joint bank account is a savings account that is owned and operated by two or more individuals. All the holders of the account will have access to the cash in the account, and all of them can carry out the cash related transactions. Joint accounts are usually opened by a married couple, close family members or business partners.
Benefits of Having A Joint Bank Account
Opening a joint bank account can prove to be beneficial for family members or business partners in several ways:
- Having a joint account makes it easier for family members to save towards a shared goal like for a new home, a new vehicle or a vacation.
- Pooling your money with family members or business partners makes it easier to meet minimum balance requirements.
- All the account holders can oversee the transactions that are being carried out. This reduces the risk of money being misused.
- It makes it easier to pay shared expenses using only a single account.
- Joint accounts considerably reduce the number of fees you pay to the bank.
Risks Involved In Joint Accounts
While there are a lot of benefits that come with a joint account, there are a few risks involved as well.
1. Shared Access To Money: You should keep in mind that all the account holders will have equal access to the money in the account. This increases the risk of the money being stolen or misused by certain members.
2. Shared Responsibility Of Debt: When you have a joint account with someone, you also share the responsibility of debt. If one of the account holders get into debt that he/she can’t repay, even you might end up having a bad credit score.
Types of Joint Accounts in India
Banks in India offer a variety of joint account types for various authoritative and accessibility purposes. Knowing the different types of joint accounts can help you make the right decision. Here is a list of all the joint account types and their functionality.
1. Either Or Survivor
This is the most popular account type in India. Only two individuals can open an Either or Survivor account. There is a primary account holder and secondary account holder. Both of them can access and operate the account. If one of the account holders dies, the survivor will be paid the final balance. The survivor can choose to continue the account as a regular account if needed.
On the event of the death of both the account holders, a separate nominee will be given access to the account and the funds.
2. Anyone Or Survivor
This account is very similar to the Either or Survivor account in functionality, the only difference being that this account type can be opened and operated by more than two people. This account type is very useful to open joint accounts for an entire family or a business with more than two partners. All the account holders have access to the account and can perform account-related transactions. If one of the account holders dies, the others can continue the account without any hindrance. The final balance will be paid off to the survivor.
3. Former Or Survivor
This account type again can be opened only between two individuals. There is a primary account holder and a secondary account holder. But, only the primary holder account holder has access to the account and can operate it. Upon the death of the primary account holder, the ownership and the access to the account are transferred to the secondary account holder. The secondary account holder can claim all the funds and close the account or choose to continue it as a normal account.
4. Latter Or Survivor
This account is very similar to the previous account. But, instead of the primary account holder, the secondary account holder has access to the account and can operate it till he/she is alive. When the secondary account holder dies, the ownership is transferred to the primary account holder who can choose to continue the account or close it.
In this type, the account can be opened and operated by more than two people. All the account holder operate this account together. In other words, if a transaction has to be performed, all the account holders need to be present. No one can operate the account individually without the consent of others. This type of account is especially beneficial for business partners. This reduces the risk of funds being stolen or misused.
If one of the account holders dies, the account becomes completely inactive and cannot be operated further. Any funds leftover in the account shall be distributed among the survivors.
6. Jointly Or Survivor
This account is just like the Jointly account. All the account holders operate the account together and share the burden. But, if one of the account holders dies, the account does not become inactive. The survivor/s can choose to continue the account.
7. Minor Account
If the primary account holder is less than 18 years of age, then, a parent or a guardian has to step in as the secondary account holder. More than being an account type, this is a requirement as per law. The parent or the guardian should hold a joint account with the minor until he/she reaches the age of 18 years.
So, these are various types of joint banks accounts in India, make sure to choose wisely which one to opt for.
Things to keep in mind while Opening a Joint Bank Account
Here are a few things you should remember while opening a joint bank account.
- Always open a joint account with someone whom you completely trust. Preferably a family member.
- If you have to open an account with an outsider or a business partner, clear all the conditions beforehand and in writing if possible.
- The interest in such accounts will usually be considered as the income of the primary account holder. If you are the primary account holder, you will be liable to pay tax on that income.
- After the death of one of the account holders, the rights of the account are easily transferable; there is no need for succession certificates.
- If you open an account with someone who is not from your family, both of you should submit separate address proofs.
- Debit cards can be issued separately to all account holders. However, the cheque book is issued together.
- You can always request the bank to add new account holders and delete existing account holders in case of misuse of funds. The primary account holders can also place certain banking restrictions on the other account holders.
Opening a joint bank account in India has its fair share of advantages and disadvantages. It is very important to be sure about what you want from a joint bank account and how you want it to function. Knowledge of the different types of joint accounts and their functions can help you make the right decision for yourself and eliminate any chances of fraud.