In most households, the couple decides to manage their banking activity in a joint account, as part of their choice to live together. This article seeks to raise public awareness of the importance in examining certain issues when deciding to open a joint account, and other points that should be noted and decided upon when managing a joint account, that can help in complex situations such as the death of one spouse, etc.
A joint account can, of course, be an account that is managed with other relatives (siblings, parent and child, etc.) or a joint account held by business partners. This article deals mainly with a joint account of a household – spouses.
What is a joint account?
An account in which both spouses are account holders, and where they have authorizations to make transactions in the account. This can be a new bank account or an account of one of them to which the other spouse is added.
If the couple opens a new account, even if they choose to remain with an existing account, it is worth comparing the various banks to check the account terms offered to you, and if necessary to negotiate over the terms.
How can we open a joint bank account?
An account can be opened by going to the bank branch or online. The Banking Supervision Department has made it easier for customers, and under certain circumstances, allows people to open an account online—even a joint account—without needing to go to a branch.
What are the advantages when opening a joint account?
In general, managing a joint bank account makes it easier to manage a joint household. It can also lead to savings in bank fees, since the couple pays for the management only one account, rather than two.
In addition, if two salaries (from the two spouses) are transferred to a joint account, this can generally increase the customers’ negotiating capacity with the bank, which will make it possible to request various benefits in managing the account.
At the same time, when opening a joint account, it is recommended to be aware of other factors:
The state of the spouse’s finances
When deciding to be added to a joint account, you should examine the state of the account before being added to it. It is important to know that when being added to a joint account, the state of the existing account applies to the added customer as well, which means that if there are guarantees or loans, or so forth, they will apply to the added customer as well.
Signing rights in the account
When opening an account, you will both be asked to choose the signing rights that are appropriate for you. There are two options:
- Joint signing rights:
Definition: Every transaction made in the account requires the consent of all account holders.
Advantage: Each partner can closely monitor any transaction that will be carried out by the other partner in the account, since no transaction can be completed without the agreement of all partners.
- Signing rights jointly and severally:
Definition: Each of the account holders is authorized to make transactions in the account (debit or credit the account) without needing to obtain the consent of the other partner(s).
Advantage: Banking services are convenient and available to each account holder, who can act independently in the account.
This method requires mutual trust between the account holders, since each of them can debit or credit the account, meaning that each partner can deposit or withdraw funds at any time, without needing to obtain the consent of the other partner(s).
Monetary disputes between spouses during the lifetime of the account
When disputes arise between spouses during the lifetime of the joint account, we suggest examining the option of changing the signing rights in the account so that any transaction in the account will require the consent of both partners (“joint signing rights”). You should take into account that if there is a lack of cooperation between the account holders, this directive may lead to a “freeze” of activity in the account. If there is a lack of trust between the spouses, the joint account can also be closed and separate accounts opened.
Signing the “survivorship” clause
When opening a joint account, you will be asked to consider how the account should continue in the event that one of the account holders passes away. The default option is that the bank will freeze the possibility of making transactions in the account until an inheritance order or probated will are presented. This course of action is dictated by the need to ensure that all heirs are treated properly, but the situation may create financial difficulty for the remaining spouse.
In order to avoid freezing the account while waiting for an inheritance order or probated will (a process that can take a few months), and in order to enable the remaining partner to continue the reasonable management of the account, the account holders should sign a “survivorship clause”. This clause can be signed when opening the account or even years later, when the account is already active.
It is important to understand that the survivorship clause is not an alternative to a will, and cannot be used as the basis for distributing estate funds. The purpose of this clause is to avoid freezing the account due to the death of one of the partners, and to enable the remaining partner to make ordinary current transactions in the account. We emphasize that the remaining partner in the account cannot distribute the estate, close the account, or add a power of attorney to the account.
Please note – while the remaining partner in the account is permitted to continue acting in the account, this does not affect the rights of heirs in the account, and if there is a lack of agreement between the heirs, the remaining account holder may be sued for a return of the funds that have been withdrawn from the account.
In addition, the bank bears duties of caution and of trust to its customers. These duties do not expire after one of the joint account holders dies. In other words, the bank is bound to act with extra caution when the remaining partner wants to make an extraordinary transaction such as withdrawing significant funds from the account, and certainly may not allow the withdrawal of the entire balance. Furthermore, if the bank is aware that the deceased has left a will, the bank is permitted to demand that the will and a probate order be presented to it, in order to make sure that the funds in the account are transferred to the heirs pursuant with the will.
How will I know whether I have signed a survivorship clause?
If you are spouses who currently manage a joint account and you do not remember whether you have signed such a clause, we recommend that you check this with the bank. If you have not signed such a clause/form and you are interested in doing so, you must explicitly request this from the bank, and you can do so even years after the account was opened.
Monitoring activity in the account
It is recommended to always closely monitor activity in the account, particularly in a joint account, with “joint and several” signing rights. You can do this with tools offered by the bank (sending warnings by SMS, and so forth) or by actively checking activity in the account at frequent intervals on the bank’s website or application.