5 Mistakes Couples Make When Opening Joint Accounts

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Here’s the good news about joint financial accounts for couples: They make it really easy for both parties to access those funds.

And the bad news is, well, they make it really easy for both parties to access those funds.

So says Carolyn McClanahan, a certified financial planner with Life Planning Partners, Inc. of Jacksonville, Florida. Opening a joint account can lead to trouble if couples aren’t aligned on finances, aren’t fully honest with each other about money or make mistakes in managing the account.

“The characteristics that make financial success for a couple more likely is to not have ‘money infidelity’ — meaning they always have open conversations about their finances,” McClanahan said. “A joint account versus individual accounts versus a combination of both isn’t the important decision. The important decision is that both parties agree on how the finances will be managed.”

Wendolyn Forbes, also a CFP, said best practices around joint accounts for married and unmarried couples are similar. Forbes is based in North Carolina and works with Wealth Transition Finance, a member of Advisory Services Network, LLC.

“If the couple has easy conversations about finances, then opening a joint account may be appropriate,” Forbes said. “But if it’s challenging to talk about finances right now, before a joint account is opened, it may become even more challenging if a bank account is shared.”

On the positive side (in addition to convenience), joint accounts can help couples to build that trust and improve their communication around finances. Before you move ahead, though, here are five common pitfalls to watch for.

Failing To Reconcile Differences in Financial Style

Many of us find ourselves in relationships, marriages or other partnerships in which financial philosophies diverge. When they do, it’s important to drive understanding of each other — as well as a plan for how to mitigate the differences.

“Some couples are not on the same page with how they manage their finances,” McClanahan said. “For example, if one is a saver and one is a spendthrift, then they can be at odds with how the accounts are utilized. I council all new couples to have conversations about money and come to an agreement on how finances will be handled in the relationship.

“Couples should consider their respective habits around money,” Forbes added. “Money habits like budgeting, saving and spending (including overspending) should be discussed.”

Failing To Establish Rules Around How the Account Is Managed

There are many flavors of rules around joint accounts. Examples include:

• “Check in with the other person before any expenditure over $100.”
• “Once a chunk of money in the account has been earmarked for bills, it can’t be spent for something else unless both of us agree.”
• “Never try to hide an expenditure from the other person.”

With the rules in place, it’s important to have accountability.

“Couples may benefit from creating rules on how money is contributed, how money is spent and what the consequences should be if the account is over drafted,” Forbes said. “For example, if the account is overdrafted only one time, the partner who caused the overdraft may be responsible for paying the overdraft fee and be expected to stop using the account for a specific period, so additional fees may be avoided.”

Failing To Utilize Apps and Alerts

Forbes said today’s banking apps and their numerous features are often underutilized. She said some of them could help smooth out any joint-account bumpiness.

“The best thing to do is to really leverage technology,” she said. “Set up some automatic alerts, triggering when the account goes below a certain threshold as well as when withdrawals take place.

“This may help to prevent overspending or negative balances, but it may also help the couple to grow or improve their financial situation by working toward a common goal.”

Failing To Consider Where You Want the Money To End Up in the Long Term

If you’re sure you’ll want any money in the joint account to go to your partner if you die first, no problem. In that event, your partner should have full control of the money with no probate needed — another advantage of joint accounts for couples.

If you intend for someone else to get the money, you should consider another approach.

“If you want others to inherit the money in the account, they will not receive it because it will pass to the joint owner,” McClanahan advised.

That’s one more reason may want to maintain individual accounts, or at least a joint-individual hybrid.

“I stress to people with individual accounts to list beneficiaries, so the accounts don’t end up in probate,” McClanahan said.

Failing To Communicate

Even if the trust and the rules are there, regular communication is essential, experts say. That goes not just for joint accounts, but for shared finances in general.

“Consider scheduling a monthly check-in to review your financial situation as a couple,” Forbes said. “And for discovering whether you are on track for meeting your goal or need to adjust.”

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