Banking Law: Joint Marital Accounts
There are nine community property states, including Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Alaska also has a provision for community property, although for tax purposes it is not considered a community property state. Banking law may be slightly different in these states, insofar as they may require spouses to agree to allow the other to have their own personal checking or savings account.
While it is fairly common for most married couples to merge their finances shortly after (and sometimes before) marriage, in community property states, banking law joint marital accounts state that bank accounts that are in the name of one spouse would automatically transfer to the other spouse upon death.
This goes for checking accounts, savings accounts and may also impact other non-retirement banking accounts. The only exception to this would be for IRA and HSA accounts where a beneficiary is designated by the account holder. There are even exceptions for IRA and other retirement accounts.
In order for a spouse to designate a non-spousal beneficiary in a community property state, the spouse would have had to sign a waiver allowing a different beneficiary. This includes designating children for beneficiaries and would apply to all accounts that allow for beneficiaries (namely any type of retirement account and health savings accounts).
Basics of Joint Accounts
The basics of banking law - joint marital accounts, for example - is not much different than any other joint accounts. When an account is opened with more than one person’s name on the account, all the parties have equal access to the funds in that account. Banking institutions treat every account-holder on that account equally for purposes of deposits and withdrawals. When a joint account is opened, all the parties must sign the appropriate signature cards which acknowledge their acceptance of the terms. However, when closing joint accounts, only one person is required to sign a check or withdrawal form (in the case of savings accounts).
Opening a joint account
In order to open a joint savings account or a joint checking account, all signatories on the account must sign the appropriate forms required by the bank. In the case of a checking account, checks would be printed with all the account holder names on the face of the check. This allows for any party on their own to write a check that must be honored by the bank. This includes writing a check to liquidate the account. Each owner of the account may transfer a part or all the balance of the account to a separate account in their own name as well. Individual account owners may also be allowed to close the account completely without the authorization of the other parties on the account.
Savings accounts may be passbook or statement savings accounts that are opened in more than one name. At a minimum, the bank would require each person that would be an owner on the account to supply their signature on a signature card. This is to help protect the bank if one of the account signatories were to close the account. Like a joint checking account, a single owner of a joint checking account may withdraw the entire balance without the authorization of the other account holders.
For those couples who are getting married or are newly married, before you open any joint accounts make sure that you understand the basics of banking laws and joint marital accounts. Those who do not live in a community property state may consider keeping a personal account in addition to the joint accounts that are used to pay household expenses.
Sources and image credits
Sources: IRS: https://www.irs.ustreas.gov/pub/irs-pdf/p555.pdf
Credit and Divorce: https://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre08.shtm
Legal Definitions: https://legaldefinition.us/page/3?s=joint+bank+accounts
Banking Law: Lawyers.com: https://banking-law.lawyers.com/consumer-banking/Bank-Account-Basics.html
Wedding Rings: By Jeff Belmonte from Cuiabá, Brazil (Flickr) [CC-BY-2.0 (www.creativecommons.org/licenses/by/2.0)], via Wikimedia Commons
Bank book: English Wikipedia user Airodyssey [GFDL or CC-BY-SA-3.0 (www.creativecommons.org/licenses/by-sa/3.0/)], via Wikimedia Commons