The Pros and Cons Of Joint Accounts
Joined at the hip
Joint accounts are one of those things that can very easily seem like a good idea at the time and then turn into a living nightmare if the two people involved fall-out with each other.
For better or for worse
Most commonly joint accounts are held by husband and wife. These accounts are set up so that each person may independently use the shared funds that go into the account. Sometimes a couple will set up a joint account specifically to pay for household bills like utility bills and council tax.
Setting up direct debits is as easy with a joint account as it is with any other account; you just need both signatures on all instructions to the bank. A house can run quite efficiently with all its monthly bills on direct debit from a joint account as long as the holders continue to put money into it.
Not all rosy in the garden
As with all things in partnerships, while the partnership is going well everything works very well: two minds are better than one. But once the relationship turns sour things can get difficult.
Say, one partner chooses not to pay money into a joint account. That will mean the other partner will be liable for payments to all the joint creditors, assuming that payments were in both names. So any bills associated to, say, Mr and Mrs Jones, in which Mr Jones opts out of paying will leave Mrs Jones having to pay the bill. As a jointly named person she is legally bound to pay the full amount. This applies with everything going through the joint account in which they are both named.
This also applies if the joint account goes into unauthorised borrowing due to the change in circumstances, then Mrs Jones will be liable for repayments and the payment of charges if Mr Jones is unwilling to pay his share.
Equally, if Mr Jones has died, then he has a good reason not to pay his share, but all bills will have to be paid by his estate; in other words, Mrs Jones again.
If we assume for a moment that Mr and Mrs Jones had at one time been so much in love that they managed to run a business together. When things turned sour between them, let’s say the business then went “belly up” and Mr Jones rather cunningly declared himself bankrupt. What would happen then?
Well, rather predictably, any bills that were owed by the partnership would have the creditors crawling all over Mrs Jones for full payment.
We will leave Mr and Mrs Jones in their rather unhappy state and move on to others. Sometimes a joint account can be set up not to pay dull things like the household bills or for a business partnership but to create a fund into which both partners pay a regular sum each month so they can go out and have fun.
Things like holidays can be saved up for with this fund or those precious weekends away from the children so you can both go off and enjoy yourselves without feeling guilty. Well, not guilty about using the fun fund anyway!
Shared house shared bills, again
You don’t have to be married or common law partners to set up a joint account – anyone can do it as long as they satisfy the banks’ criteria. For example students who share a house. There may be four or five of you in one house and you want to fairly split the bills, so one way to do that is to set up a joint account and set up direct debits each month: done and dusted.
Just remember to change those direct debits and change the name of the account if one of you leaves during the year. Hopefully this won’t be a regular occurrence as all those trips to the banks to sign another form will start to get on your nerves after a while! Mind you as a student it might be somewhere to go to get a free cup of coffee
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