How a Joint Bank Account Works in Canada

If you have financial goals or expenses in common with another person, a joint bank account could make it easier to manage your finances. But before opening a joint account, make sure you understand how it’s different from an individual account so you can weigh the potential benefits and drawbacks.

What is a joint account?

A joint account is a bank account that belongs to two or more people .

Joint accounts have most, if not all, of the characteristics of a standard chequing or savings account. All joint account holders have the ability to perform banking transactions, such as making deposits and withdrawals, writing cheques and transferring funds.

Joint bank accounts are a popular option for couples because they can make it easier to manage shared expenses and savings goals. They can also be useful for parents, older children, business partners or roommates.

How a joint bank account works

A joint account gives all account holders equal access to any funds it holds, so they can each make withdrawals, pay bills and transfer money. For example, a couple might use a joint chequing account to pay shared expenses such as a mortgage payment and utility bills, or use a joint savings account to stash money for a future vacation.

All people listed on a joint account share full responsibility for the account. If one person overdrafts the account, all account holders can be held responsible for any resulting fees or debt that accumulates. Similarly, one account holder could withdraw all the money, even without the consent of other account holders, and there would be no legal recourse. That’s why it’s vital to only open a joint account with someone you trust and have a robust agreement about how you’ll use it.

Types of joint accounts

Chequing and savings accounts are the most common joint accounts.

Many traditional banks, online-only banks and credit unions offer joint account options.

Pros and cons of a joint account

Pros

Cons

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What happens to a joint account in case of death or divorce?

The terms of the banking agreement and the laws in your province or territory dictate what happens in the event of death or divorce.

If the terms grant a right of survivorship, the funds in the joint account transfer to the surviving account holders, such as the person’s spouse or children. However, if there is no such agreement, the funds may become part of the joint account holder’s estate, which can become very complicated.

If joint account holders divorce, the account may be dissolved and the assets divided as part of the divorce settlement.

Alternatives to a joint account

Some banks may allow you to name a beneficiary for your individual account. This person wouldn’t have any access to your account or funds while you’re alive, but would receive those funds in the event of your death.

Depending on the situation, a power of attorney may also be an alternative to a joint bank account. A power of attorney is a legal document in which a person gives someone else control over their finances and property while they are still alive. Like when opening a joint account, it’s important to make sure you’re choosing someone who is reliable and trustworthy before assigning power of attorney.

And of course, tools like Interac e-transfer allow you to easily transfer money between partners or friends, so you may opt to simply keep your individual bank accounts.