How to Create a Joint Account: A Step-by-Step Guide

A joint account is a financial account, such as a checking or savings account, that is owned and operated by two or more individuals. This setup allows all named account holders to access and manage the funds, making deposits, withdrawals, and other transactions. The primary function of a joint account is to facilitate shared financial management, often for household expenses, common goals, or managing finances for another person. While similar to individual accounts in functionality, the shared ownership aspect introduces specific considerations regarding access, liability, and the disposition of funds.

Understanding Joint Account Ownership Types

Joint accounts typically come with different legal structures that determine how the funds are owned and what happens to them upon the death of an account holder. Two common types of ownership are Joint Tenancy with Right of Survivorship (JTWROS) and Tenancy in Common (TIC). Understanding these distinctions is important, as they carry significant implications for asset control and estate planning.

Joint Tenancy with Right of Survivorship (JTWROS)

Joint Tenancy with Right of Survivorship (JTWROS) is a common arrangement where each account holder has an equal right to the account’s assets. A defining characteristic of JTWROS is the right of survivorship: upon the death of one account holder, their interest automatically passes to the survivor(s) without probate. This ensures a seamless transfer, often favored by married couples or close family members for convenience and to avoid probate delays. All joint tenants share equal access and control, meaning any owner can withdraw or manage the entire balance.

Tenancy in Common (TIC)

In contrast, Tenancy in Common (TIC) does not include the right of survivorship. Under a TIC arrangement, each account holder owns a distinct, undivided share of the assets. If one owner passes away, their share does not automatically transfer to the surviving account holders. Instead, the deceased owner’s portion becomes part of their estate and is distributed according to their will or state intestate succession laws, often requiring probate. This structure allows for individual shares to be bequeathed to specific beneficiaries, offering more flexibility in estate planning than JTWROS.

Gathering Required Information and Documents

Before initiating the joint account opening process, all prospective account holders must gather specific information and documents. Financial institutions are required by federal regulations, specifically the Customer Identification Program (CIP) rules, to verify the identity of every customer opening an account. This regulatory framework aims to combat financial crime, including money laundering and terrorism financing, by ensuring banks know their customers’ true identities.

Identification

Each individual seeking to be an account holder will need to provide a government-issued photo identification. Acceptable forms typically include a valid driver’s license, state-issued identification card, or passport. These documents must be original, unexpired, and include a photograph or signature for verification. Banks often require at least two forms of identification, with one being a primary photo ID and the other a secondary form.

Other Information

In addition to identification, each applicant must provide their Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN). This tax identification number is mandatory for U.S. persons as part of the CIP requirements. Proof of current physical address is also required, typically satisfied with a recent utility bill, lease agreement, or mortgage statement. While not always a strict requirement for opening, having details for an initial deposit, such as the amount and source of funds, can streamline the process, as many banks require an initial deposit to activate the account.

Navigating the Account Opening Process

Once all necessary information and documents are gathered, the next step is opening the joint account. The method for opening an account varies by financial institution, with options including in-person visits, online applications, or sometimes mail. Many banks offer the convenience of starting the application online, though some may still require an in-person visit for specific account types or if additional verification is needed.

Application Methods

For in-person applications, it is often required that all prospective joint account holders be present. This allows the bank to verify each individual’s identity directly and obtain all necessary signatures on account agreements and disclosures. If applying online, the process generally involves submitting information through a secure portal, where each account holder completes their section and provides digital copies of identification and proof of address. Some online processes may involve sending a link to the second applicant to complete their portion.

Verification

After the application and documents are submitted, the financial institution will proceed with verification steps. This often includes electronic checks against databases and sometimes non-documentary methods to confirm identities. A common online verification technique is the use of micro-deposits, where small amounts are deposited into an existing account, and the applicant confirms the exact amounts to verify ownership. This verification can take anywhere from a few seconds to several days, depending on the method. Upon successful verification and initial funding, the account will be activated, and details like debit cards and online banking access will be provided to all account holders.