If you are married or committed, consider opening a joint bank account at some point. A shared account has many benefits, like allowing you to pool your resources and pay for shared bills. It also helps you manage money efficiently because you don’t need to divide anything.
It’s essential to close your account immediately. You might feel like it’s a big step. Leaving it open and stopping using it might seem easier. It’s better to close your joint account as soon as possible, as it can protect you in several ways.
Are you closing a joint account? Here are some things to know about closing a shared account.
1. Closing the account quickly after a breakup helps you prevent penalties
Thinking about leaving your account open after a breakup and just stop using it? Your ex-partner could use the shared account irresponsibly, and you could face penalties. They can charge more than you can afford and rack up overdraft fees, and you would have to cover these costs. Closing the account as soon as possible after a breakup will no longer hold you liable for any financial mistakes your former partner makes.
2. Either partner could drain the account
Having a shared account means co-owners can access the money in the bank whenever they want. Your partner can drain the account and take every penny out of it. You must divide your assets properly after a breakup or ask the court to determine the split if you or your partner cannot settle. The court might decide to split the amount in the joint account in half, and any of the co-owners draining the account could have legal action taken against you.
3. Both owners are liable for taxes associated with the account
Co-owners will handle any income tax the joint account incurs, typically on the percentage of ownership each person has in the account.
4. Cancel all automatic withdrawals
Don’t forget to cancel any auto debits or withdrawals after closing your joint account. If you had your bills directly paid through the joint account, you need to cancel that and arrange for the money to be transferred from elsewhere. Otherwise, you might be facing penalties or late fees for nonpayment.
5. A beneficiary gets the money in the account upon the passing of all account holders.
Under the right of survivorship, all funds will go directly to your beneficiaries in case of your death as per the wish of the living joint account holder.
It is better to close the account, prepare for taxes, and be aware of the legal rules as quickly as possible after a breakup to ensure the process of your shared banking relationship ends on good terms.