KNOW THE RISKS, RESPONSIBILITIES AND BENEFITS THAT COME WITH A JOINT BANK ACCOUNT
A joint account also known as a joint deposit account is available in Canada for those of you who want equal access to make withdrawals, deposits, pay bills or to carry out other transactions as needed.
The main ingredient of a joint account is dual responsibility.
You may be getting married or are married and want to open a joint account with your spouse or partner. Perhaps you are an adult who wants to open a joint bank account with a parent or vice versa a parent who wants to open a joint account with a child.
Alternatively you could be roommates, family, business partners or even best friends with someone and want to open a joint account.
Either way you can open a joint account at banks in Canada but there are risks involved and a process you have to go through which I will explain below.
Over the past 10 years of living in Canada and in the last year we’ve been through many ups and downs with a few banks mainly due to marriage, death and health reasons.
We’ve learned a few lessons especially about what happens to a bank account if a spouse dies and you’re not named on the account. In the process we were also educated about how to become joint on a bank account with a parent.
I actually opened a bank account in Canada before I moved to Canada but while I was visiting so I could move money from the UK to Canada. I was already married to my Canadian bride so that helped speed the process up for me in terms of having someone backing me up.
Surprisingly I was also given a PC MasterCard where my wife was the primary account holder so I had access to one while I was in the UK.
Once I moved to Canada I had to venture on my own to build credit in Canada which meant finding any business or Canadian credit card to give me a credit card in my name. I was successful with this thanks to Sears Canada at the time but they no longer exist as they closed up shop over the past year and a bit.
At the end of the process we were left with his and her bank accounts, credit cards and even utility bills with nothing in joint names.
It was time for us to become joint because my credit score in Canada was fine and we found out about the red tape involved if one spouse were to die which I touch on briefly below and have written about before.
What is a joint bank account?
A joint bank account, joint deposit account or mutual bank account is a bank account that is set up with another person(s) who also has access to the money going in and out of the account. In other words more than one person has access to a bank account at any given time.
For example: My mother-in-law has a joint bank account with her children who all had to meet in person at the bank where the main account holder had to give consent to add her children to the account.
The number one reason for the joint account access was due to declining health so while she was still able to give consent it was important to make sure the access was there so the kids could use the money to pay for anything she needed.
Her children also had to give consent that they wanted to be added to the account because you can’t just add anyone. The banking representative also explained the risks involved with being a joint account holder to them which is very important to know before jumping in.
From start to finish the entire process took about one hour.
Risks of a Joint Account
Before getting yourself involved with a joint account in Canada it’s important to understand the risks involved such as;
- Right of survivorship when one of you dies no matter what the WILL or estate plan says. If you have a joint account with a parent and a parent dies you are now the main account holder.
- Money in the account is open to claims by creditors for both of you no matter who puts more money in the account
- Any outstanding debt by the bank can and will be recovered in full even when one of you dies as you are both jointly responsible for all unpaid amounts.
- The bank will act on instruction from either account holder which means either one of you could drain or remove funds from the bank account without consent from the other.
- If you have chequing joint account either bank account holder can write a cheque.
- The joint account can be closed by either of the account holders if the account balance is zero.
A huge non-bank related risk of a joint bank account is when you have a saver and a spender who has access to the account can cause family, friendship or business problems.
This can be cause for disaster and certainly something to discuss before you open a joint account. Having different views on how money is handled in a relationship scares couples away from allowing each other access to their money.
For this reason if you are common-law or married you may want to keep a discretionary bank account for savings and a joint account to pay bills.
Types of Bank Accounts
Every bank in Canada offers a chequing account and savings account but from there each bank has different products in terms of savings opportunities with-in the bank for their customers.
The best option for anyone interested in opening a bank account in Canada is to research the different banks in Canada online to see what they offer. Most times you don’t need to make a phone call or go into a bank to find out what products they sell or offer because it’s all detailed online for easy access.
Best joint savings account
I don’t think there is one best bank account for married couples or for those looking to join forces with someone else with a bank. I think the best way to find out what suits your financial needs is to write out a list of what you want from a bank account as well as the bank and then research them online.
- TD Canada Trust Toronto Dominion Bank
- Bank of Montreal (BMO)
- Bank of Nova Scotia (ScotiaBank)
- Royal Bank of Canada (RBC)
- Canadian Imperial Bank of Commerce (CIBC)
- Simplii Financial (Online)
- Tangerine Bank (Online)
For example: If you don’t want to pay any fees related to banking like we didn’t opt for a bank that has low or no fees for banking with them. Every bank account is different as you might want peace of mind and go with an unlimited bank account that offers you as many visits to the ATM for free, free cheques, free e-transfer, money back, and fraud alert.
You may also get a fee rebate if you keep your bank account balance above a certain amount. I know my mother-in-law gets a fee rebate at TD Canada Trust if she keeps her savings account over $4000 plus a seniors rebate.
If you want a bank that is brick and mortar and not online then your options are wider but your choices are limited to what you have available in your area. If you opt to bank outside of where you live then you must drive to gain access to their services during business hours.
Setting up a joint bank account online
Can you set up a joint bank account online?
You can in part set up a joint account online but you most likely have to make a phone call to the bank so they can verify who you are if you are already a banking customer. If you’re not then going into the bank is probably your best option for setting up a joint bank account.
Setting up a joint account at any bank is relatively simple provided you have the documentation that they require. Almost all banks require you to fill out an application to open a bank account whether it be online or in person. If you are not a current customer then you will have to go into the bank to set up the account.
When we decided to go with a joint bank account with Simplii Financial as long as we were already both customers of the bank and had an online profile we could call and open a joint bank account without issue. They already have all of your personal information so it’s super-easy to open a joint account from that perspective but not so much if they don’t know you.
Both parties must be present at the bank when opening a joint bank account and setting up a meeting with a bank representative before you go via telephone may help get you in and out faster.
This is what Mrs. CBB did when she set up a joint bank account with her mother after her father passed away. You will also have to show legal identification such as a driver’s licence, birth certificate, passport, permanent resident card, social insurance number (optional) and utility bill to show your current address.
Joint bank account not married
If you open a joint bank account and you are not married you still have the same risks as if you were and listed above.
Types of Joint Bank Accounts
When we opened a joint account it was for bills only and that was a chequing account that we both had access to and could see what was going in and out of it at all times.
We were both able to deposit money into the bank account as well withdraw money when needed but it was the best option for setting up our automated bills and to pay other bills as needed.
The types of savings accounts and other bank accounts offered by your financial institution of choice varies from bank to bank. Some banks offer certain perks to their customers such as cash back offers, higher interest or interest boosts from time to time.
With Simplii Financial from time to time they offer us an Interest boost on any new deposits in our joint savings account which is great because earning more money in interest is a bonus.
Your best bet is to find out what bank accounts the bank offers (checking online is the easiest option) and then ask them any questions related to opening a joint account for those you are interested in.
Closing a Joint Bank Account
Not all relationships last forever so if you own a joint bank account and you are no longer with your partner or spouse you can close a joint bank account but beware you can both do it without the other present.
To close a joint account both holders of the account don’t need to give permission. If you are part of a joint account almost all banks will allow one person or the other to close it unilaterally. This means you can close the account without the other person provided there is a zero balance on the account.
When you close any bank account you will need to provide identification so be prepared to show this at the time of closing. If you are the primary account holder and want to remove someone from a joint account you may be able to do this in person provided your bank allows it.
At TD Canada Trust for example anyone listed on the joint bank account can close it in person with identification. If you have a zero balance you can also call the bank to have it closed or log into your online banking portal and send a secure message to them to request the joint account to be closed. If you are trying to close a joint business account this must be done in person.
Death and the Joint Bank Account
When someone dies and they are part of a joint bank account the other bank account holder now owns the account whether they are listed on the will or not.
This is very important for married couples to understand because if you are not listed on the bank account and your spouse passes away the bank account will be frozen by the bank.
You may also have to deal with probate on the account and a waiting period from the bank to gain access to it once you provide a death certificate and other legal documentation such as the WILL and/or power of attorney of your spouse.
Benefits of a Joint Account
- Less hassle if something were to happen to one of you such as death or illness
- Ability to watch what your child is doing with their money or to guide them
- Ability to deposit and withdraw easily and helps to pay bills without hassle from two bank accounts and transferring money.
- Those listed on the joint account can get a debit card, cheques and easy access to the account
- Easier to track cash when you are budgeting equals saving time.
- Great way to combine money for couples and helps to build trust
- Earn rewards points from a joint bank account and a linked credit card. (This is what we did with our PC Financial MasterCard to earn Optimum Points. We also have this set up with TD Canada trust and earn cash back each month.
Although we have a joint account now for all of our banking needs the only pitfall is not being able to buy something without the other knowing especially if it is a gift. This is when it’s easier to take out cash, or at least for us it is.
You can also learn more about joint bank accounts in Canada for seniors here.
Discussion: Do you have a joint bank account and what are your thoughts on owning one? Leave me a comment in the section below and I’ll do my best to respond to everyone.