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How Joint Bank Accounts Work

Utilizing joint bank accounts as part of an estate plan has many advantages and disadvantages. Whether a joint bank account is right for you depends on a number of factors. Joint accounts are appropriate estate planning tools in certain cases. They can also be the source of litigation.

What is a joint bank account?

A joint bank account is a bank account with two owners.

The person who deposits money in a joint account is called the depositor. Both account owners are known as joint tenants. At the moment the money is deposited into the joint bank account, it becomes property of both joint tenants, 50% each. It doesn’t matter who deposits the money, both joint tenants own one-half of the money (or securities) in the joint account once the deposit is made. When one joint tenant dies, the surviving joint tenant owns everything in the account.

However, there is an important exception to this rule. The money will still be owned entirely by the depositor if the account is designated a “convenience account” with the bank.

A convenience account is a way for the depositor to allow the other joint tenant to make withdrawals from the account on the depositor’s behalf, but without the other joint tenant becoming an owner of the money or securities inside the account.

The other joint tenant, for example, can pay the depositor’s bills on his or her behalf, but does not own 50% of the funds in the account. If the depositor dies first, the joint tenant does not automatically become the owner of the funds unless the depositor named the joint tenant the beneficiary in a will or trust.

In a regular joint account, where the funds are owned 50/50, the person who outlives their joint tenant will automatically inherit all the funds in the account. It generally does not matter what the depositor’s last will & testament says. If a joint tenant dies, the other joint tenant automatically becomes the owner of everything in the account, even if the depositor’s will says otherwise. But with a convenience account, this is not the case.

Advantages of Joint Accounts

Joint accounts are great tools to avoid probate, which means the surviving tenant automatically inherits the funds – there is no delay (although some banks may have surviving tenants jump through a few hoops before releasing the funds).

Many spouses routinely commingle and share their money, and a joint account is often very appropriate for spouses in this type of relationship.

Joint accounts can also avoid adult guardianship in certain circumstances. If one of the owners of the joint account can no longer make financial decisions for themselves – perhaps due to dementia or an accident – the account can sometimes be used to avoid the need for the appointment of a guardian.

Disadvantages of Joint Accounts

Depending on who is named a joint owner, joint bank accounts can become the source of litigation. A common scenario leading to litigation over a joint account is when a parent, whose spouse has died, has multiple adult children.

For example: Child 1 lives close to Parent and is Parent’s primary caretaker. Child 2 does not live close by or is less active in caring for their aging Parent. A joint account is opened by Parent naming Child 1 as the joint tenant and a substantial sum of money is deposited.

Parent’s last will & testament leaves everything to the two children, 50/50. When Parent dies, Child 1 receives a disproportionate inheritance because of the joint account. Was it Parent’s intention to give Child 1 a larger gift because of all the care provided? Was the account intended only to be a convenience account even though it was never officially designated with the bank as such? Was Child 1 up to no good, and somehow managed to open the account even though it was not really Parent’s intent?

Litigation Over Convenience Accounts

Even if a joint bank account is not officially designated as a convenience account with the bank, a lawsuit can be brought to establish that the depositor intended the account to be a convenience account. This is usually very difficult to prove, but these cases can be won, depending on the facts and a myriad of other circumstances.

There is a legal presumption that the account was not intended to be a convenience account if it was not designated as such with the bank.

The person challenging this presumption will prevail only if they can demonstrate, by clear and convincing evidence, direct proof or substantial circumstantial proof of the depositors intent that the account be for convenience only or by proving undue influence, fraud, or lack of capacity.

What Happens if A Joint Tenant Withdraws More than One-Half?

From the moment of the creation of a joint bank account, both joint tenants own a 50% interest in the money deposited into the joint account. It doesn’t matter who made the deposit. They both own one-half. Either tenant, during the lifetime of the other, may withdraw up to full amount of his or her one-half. The one-half is called their “moiety”.

Where a joint tenant withdraws more than his or her moiety – the one-half they own – the other joint tenant has the right, during the lifetime of both tenants, to recover excess withdrawn.

But each tenant can consent to the withdrawal, either express or implied. In such an event, the withdrawing tenant is considered to be acting in the other tenant’s right, and the law regards the withdrawal to have been made by other tenant his/herself.

Can you see why joint bank accounts are an area ripe for litigation?

If Joint Tenant 1 learns that the other Joint Tenant 2 withdrew more than one-half – essentially dippining into Joint Tenant 1’s share – Joint Tenant 1 can bring a lawsuit to recover the money withdrawn that exceeded one-half.

Alternatives to Joint Accounts

In many cases, joint bank accounts are a perfectly appropriate estate planning tool. If a married couple manages their money together and have a relationship based on “what’s mine is yours”, then a joint account is usually harmless. In fact, in some cases, it’s perfectly appropriate and even advisable. These are not usually the circumstances that give rise to litigation and disputes.

On the other hand, when a parent has multiple children who he or she wishes to inherit equal shares of their estate, setting up a joint account with one of the children, who is acting as a caregiver, could cause unintended consequences.

In situations where an adult child is acting as a caregiver, an alternative is to execute a power of attorney in order to allow that child to access accounts. If the parent wants to avoid probate, the parent can name both children as beneficiaries on the account. The parent can also set up a lifetime revocable trust.

The Law Firm of Daniel J. Reiter, Esq. handles joint account litigation, adult guardianship law, mental health law, and estate planning and Medicaid. If you have issues or questions regarding joint accounts, we encourage you to contact us at (646) 820-4011 or

Daniel J. Reiter, Esq.

Daniel J. Reiter is an attorney admitted to practice in New York. Mr. Reiter focuses in the areas of estate and trust litigation, non-routine Surrogate’s Court work, power of attorney litigation, contested guardianship, and civil litigation and dispute resolution. He also routinely practices in the areas of estate planning, elder law, and Medicaid.

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