Banking / Checking Account

What To Know Before Adding Someone to Your Bank Account

February 7, 2023

4 min Read

Written by Nicole Spector

Edited by Chris Cluff

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There are a few reasons you might want to add another person to your bank account. Perhaps you need help managing your finances in the event that you become ill or incapacitated, or maybe you’re growing a business and want to bring a high-level employee into the financial fold.

Whatever your reasoning is, there are things you should know before adding someone to your bank account.

This Person Will Have Total Access to Money in Your Account

You must recognize, before signing on anyone new to your account, that they will have as much power over the funds in your bank account as you do, once they are added on. So you must really, really trust them.

“The new owner can withdraw funds, and make purchases with the debit card attached to the account without any restrictions,” said Ohan Kayikchyan Ph.D., CFP, and the founder of Wealth Roadmap. “Literally, they own the account in the same way as the original sole owner.”

Their Debt Can Become Your Debt

“Another important thing to understand is that if the person you’re choosing to add to the account is in debt, their creditors can legally hold you liable for their outstanding debt,” said Mark Wlosinski, a personal finance expert. “Creditors can come after your bank account and require you to pay their outstanding debt balance. So it’s best to make sure the person you’re thinking about adding is in good financial standing and will remain that way.”

Involve Your Tax Advisor/CPA

“Gift tax situations can also rise when you add someone to your account who already has some funds in it,” Kayikchyan said. “Always involve your tax advisor and ask questions, prior to adding someone to your account with funds.”

You Will Each Hold the Same Rights to the Account

You might have opened the account but, as far as rights to the account, yours are the same as the new signee.

“Doesn’t matter who is the primary owner and who is the secondary one,” Kayikchyan said. “The rights on account for both account holders are the same. The only difference is that the primary account holder is the one who is responsible for filing taxes, in case interest income is earned above the IRS’s reporting limit amount.”

If You Die, They Get the Money in the Account

It may be a bit morbid to go here, but it’s important to know. When you die, the person who is signed on to your account has the right to any money left in the account — even if you wanted the money to go to someone else.

“Upon death, the surviving owner of the account owns the fund in the account outright, regardless of what your last will and testament said,” Kayikchyan said. “There is a process involved with removing the deceased person from the account. While the process varies from bank to bank, the main document needed to be presented is the death certificate.”

It’s Not Easy To Remove Them

Adding someone to your bank account is a serious move. Don’t do this without thinking it over heavily and consulting your financial advisor, if you have one.

“Adding someone as a joint account holder is a big decision that shouldn’t be taken lightly,” Wlosinski said. “Once you’ve added someone to your account, removing them isn’t as simple as just asking the bank. Oftentimes the bank will require written consent of the person being removed before being able to do so. This can be extremely difficult and stressful to get done in the circumstances of divorce or other family-related drama. Money too often tears apart relationships for one reason or another, and joint bank accounts are often examples of that.”

Consider Adding a Power of Attorney Instead

“Remember there is always an option to add a power of attorney to your account, instead of adding a joint owner,” Kayikchyan said. “While the power of attorney will be able to manage the funds in the account, pay your bills and write checks, they will not be [an] owner of the account.”

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