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May 21, 2010

Joint Accounts - the Double Edged Sword

Posted by Anthony Demangone

We get a number of questions about joint accounts.  Usually, the caller wants to know if a joint account owner can do this or that on an account.  For example:
  • Can a non-member joint owner close an account?  A 1993 NCUA legal opinion letter stated that, yes, assuming your account agreement permits it, a nonmember joint owner could withdraw all funds.  This would effectively close the account, and possibly the membership, for the member.  Note: that letter is no longer available on NCUA's website.  This came up quite a bit when I worked at a credit union, often during a family dispute.  Members were shocked to learn that a joint owner could drain the account.  It is my money, the member would say.  True.  But in a joint account, it is their money as well.
  • Can a joint owner remove another joint owner from the account?  Look to your contract.  Usually, both account owners must agree to a change of that type. What do you mean I can't remove him.  But I just added him so he could stop by the branch on my behalf.  That doesn't matter.  Once a person becomes a joint owner, they are...well, a joint owner. 
  • Is it true that a joint owner owns the entire account when the other joint owner dies? It is very possible.  Most credit unions that I talk to set their accounts up to be "joint tenancies with the right of survivorship."  This means that both owners have complete access to the account's funds.  Upon the death of one joint owner, the other joint owner's right of survivorship means they now own the entire account.  Contrast this with a joint tenancy without right of survivorship.  In this case, the deceased owner's share passes on to his estate.   You mean grandma's account goes to Jimmy!  He was simply added as a joint owner to deposit checks for her and make ATM withdrawals!  Look at the account agreement.  Jimmy very well may own all the account funds if the account was a joint tenancy with right of survivorship.
  • Here's the classic.  I added my son to my account so he could make withdrawals while at school.  You're telling me he could withdraw ALL THE MONEY?   I always wanted to answer this question with: "Yes, sir.  In tens and twenties if he wanted."  
All of these situations flow from the same issue.  Members don't always understand the implications of adding a joint owner to a credit union account.  Often, what they really want is a power of attorney or an authorized user.   Giving access, without ownership, while retaining the right to revoke access may be what they want.  That's where a POA can work very well.   Make sure your front-line staff understands the distinctions between regular accounts and joint accounts, and what other alternatives exist at your credit union.   Here's a sample line that can come in handy for member service reps:
Ms.  Jones, all you need to do is to complete and return the joint owner addition card and other materials as we discussed, making sure it is signed by you and (insert name.)  Keep in mind that once the joint owner is added, he/she will have immediate and complete access to all funds in the account. 

The last sentence really drives home the characteristics of a joint account.  If the member balks, that's a great time to mention the possibility of using a POA to achieve his or her goals. 

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