A joint account sometimes refers to an asset, such as a checking or savings account. It can also refer to a liability, like a credit card account or mortgage. Common joint accounts include checking accounts, savings accounts, credit cards, mortgages and auto loans.
Removing yourself from the former type of account is much easier than doing so from the latter, which may be impossible. Sometimes removing yourself from the account requires the cooperation of the party with whom you share the account. This most often a spouse or parent but isn't always.
Benefits of Joint Accounts
When opening a checking or savings account, joint account holders are each able to access and use the funds in the account without asking each other for permission. Couples often use joint accounts to pay their monthly bills and more easily manage their financial lives.
When it comes to credit accounts like credit cards and mortgages, joint account holders are often able to use their combined income and credit score to get more credit than they would alone. When using the credit responsibly, both parties benefit from improved credit scores.
Considerations With Joint Accounts
Before you sign as a joint account holder, make sure you understand your responsibilities. Joint account holders have equal access to money in an account or to the credit an account extends. They also both have equal responsibility for any fees or debts the account incurs.
Your bank or creditor has the legal right to collect overdraft fees, late payment fees and outstanding credit balances from both parties. If the co-owner of your account acts irresponsibly, you're just as liable as they are.
Removal of Joint Account Holder (Credit)
Typically, lenders do not remove joint account holders from credit accounts like car loans or credit cards. You signed a contract and received credit based on the credit histories and incomes of both account holders. By removing you from the account, the lender loses the ability to go after you for payment if the other party defaults. You can ask them to remove you, but rarely do creditors comply.
In this scenario, you usually have two options. If you and the other account owner agree to remove you from the account, that person can attempt to reapply for credit by themselves. If their application gets approved and they agree to do so, the lender will usually refinance the debt in only their name. Your other option is to pay off the balance in full and then close the account.
Removal of Joint Account Holder (Noncredit)
Unlike on credit accounts, you can often remove yourself as a joint account holder on an asset such as a checking or savings account. To do so, some banks simply let you fill out a form relinquishing your rights to the funds. By signing this form, you remove all future access to the accounts and surrender your right to any of the money in it.
Technically, both account holders are free to do what they wish with the account. Some banks require both parties be present when removing an account holder. Other banks insist that a joint account must close rather than removing an account holder. In this case, the joint account gets closed and a new individual account gets opened if desired. In order to close the account, some banks require that either both parties be present or that the account balance is zero.
