23 Jun When a joint account isn’t needed anymore

 Q. My daughter is 22 and she and I are on a checking account together. We used it when she was in college. Is there a reason why we should make sure she has a separate account now that she has a full-time job and doesn’t rely on us for support?

A. Your need for a joint account may be over.

You said this account was started when she was in college, and we’re guessing you used it to provide financial support for her and keep an eye on the funds.

Now that your adult daughter has a job and no longer relies on you for financial support, there may not be a justifiable reason to maintain a joint checking account, said Lisa McKnight, a certified financial planner with Lassus Wherley in New Providence.

She said convenience is generally the main reason for opening a joint checking account because it makes it easy for family members to monitor and manage financial affairs.

“In general, joint accounts are popular with adult children and elderly parents as a convenient way for a time-pressed adult child to monitor and manage their parents’ financial affairs,” McKnight said. “They are also beneficial if you have a family member with a history of irresponsibility. The joint account will provide a level of accountability and transparency.”

She said the standard joint account has two partners who can each deposit, withdraw or otherwise manage the funds in the account without the consent of the other, no matter who contributed the funds. Each co-owner has equal responsibility for the account assets and liabilities. It can be legally difficult for one owner to recoup money improperly withdrawn by the other, she said.

When one partner dies, depending on how the account was set up, the funds either automatically pass to the other, or are split between the survivor and the estate of the deceased, McKnight said.

Joint accounts have certain characteristics, McKnight said.

First, there are rights of ownership.

“You can have a joint account with anyone. Once the account is established both have 100 percent rights to that account,” she said. “No matter who opened the account or deposits the money. In the eyes of the law, you are equal holders.”

Account co-owners enjoy the right to spend, give away or transfer funds to other accounts, without the consent or knowledge of other account holder, McKnight said. That means there is no protection for either party with a joint account, and there is nothing the bank can do to protect either party if the other person comes in and withdraws all the money.

Which leads to the next items of concern: Risk of debt collection and credit damage

Joint bank accounts are exposed to overdraft charges, debt collection, liens, judgments, or garnishments of either party, and divorces, McKnight said.

“Even in cases where joint account holders are not married — or perhaps not even related — what happens in one person’s life can affect the other’s financial assets,” she said. “For example, if one party faces a lawsuit or files bankruptcy, the account can be drawn into the proceedings.”

The account can also be used as collateral for a loan and at risk in case of a default,” she said.

So if your motivation for a joint bank account is rooted in wanting to take care of or assist your child, you can do essentially the same thing in other ways,” McKnight said.

“Consider a financial power of attorney which is a legal document allowing someone to give one or more people formal authority to access the account and assist in financial affairs,” she said.

If your daughter isn’t responsible with money, and if you’re still on the account, make sure you stay on top of it. Otherwise, you could be in for some unexpected consequences.

Email your questions to Ask@NJMoneyHelp.com.

This story was first posted in June 2015.