Difference Between Joint Account and Beneficiary Account

Banking services have evolved in the recent past. As a result, people no longer shy away from putting their savings in a bank to be accessed at a later date. The banking industry has also provided options for different bank accounts, whereby customers can access tailored products and services. For instance, the availability of joint accounts enables several parties pool funds into one account, and an agreement is made on how the said funds will be accessed. Beneficiary accounts also grant named beneficiaries’ access to funds from these accounts. This article further describes joint and beneficiaries accounts.  

What is a Joint account?

A joint account refers to an account whereby two or more owners have access to the account. They are commonly owned by couples, relatives or business partners. Trust is needed in this type of an account as named persons can access funds in the account. However, each account has stipulations on how assets or money can be accessed or how the accounts are handled after the death of a joint holder. It is also the norm for transactions to require signatures from all members. All members also share the liability involved with any fees or charges.

Joint accounts between two parties are titled with an ‘and’ or an ‘or’ between the account holders’ names whereby an account titled with an ‘and’ must have all parties signed. Accounts titled with an ‘or’ only requires one party to sign. Joint accounts can either be temporary or permanent. 

Despite the benefits associated with a joint account, they may pose some challenges such as the provision of unlimited access of funds to all parties as well as fees that may apply. The government can also seize funds for outstanding back taxes, child support and other garnishments. 

What is a Beneficiary account?

These are accounts that have a named beneficiary to the funds in the event of the death of the primary account holder. Often overlooked, beneficiary accounts are vital as they not only provide security for a person’s assets but prevent probate while also offering tax advantages for the beneficiaries. 

There are two types of beneficiary accounts namely;

Payable on Death (POD) -This is a regular account that passes the named beneficiary rights to the account upon the death of the account owner. It only involves the completion of a form indicating the beneficiaries’ details. However, the beneficiary has no rights to the account while the primary owner is alive. This gives the primary owner the flexibility of changing the beneficiaries. 

Transfer on Death (TOD) -Similar to a POD, this allows an individual to name a beneficiary for bonds, stocks and mutual funds which are only accessed upon the death of the primary account owner. 

Similarities between Joint account and Beneficiary account

• Both prevent probate upon the death of the primary account holder and where beneficiaries are named 

Differences between Joint account and Beneficiary account

Definition

A joint account refers to an account whereby two or more owners have access to the account. On the other hand, beneficiary accounts refer to accounts that have a named beneficiary to the funds in the event of the death of the primary account holder. 

Access to funds

While funds in joint accounts require signatures from members to be accessed depending on the account type, funds in a beneficiary account can only be accessed by the beneficiary after the death of the primary account holder. 

Joint account vs. Beneficiary account: Comparison Table

Summary of Joint account vs. Beneficiary account

A joint account refers to an account whereby two or more owners have access to the account. As such, signatures from members are required to access the funds. On the other hand, beneficiary accounts refer to accounts that have a named beneficiary to the funds in the event of the death of the primary account holder. Funds can only be accessed by the named beneficiary after the death of the primary account holder. Both, however, prevent probate upon the death of the primary account holder and where beneficiaries are named. 

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