How Joint Are Joint Accounts?

Many couples choose to have joint accounts where both spouses contribute funds. A joint account allows each of them to deposit and access those funds. Some spouses contribute equally, while other times, one spouse contributes more or even all of the funds. But what happens when one spouse uses the joint account to secure a debt – meaning that if the debt is not paid, the joint account can be used to satisfy the debt – that belongs solely to him? Does the other spouse have to go along with it and lose everything in the account? What if she or contributed most of the funds in the account?

A New Jersey Court recently looked at this problem. A company, a husband and another individual entered into a lease agreement with Bank of America Leasing and Capital, LLC. The lease was secured by a joint account held by the husband and his wife. Bank of America tried to get the funds in the joint account and had it frozen when the lease was broken. But the wife claimed that the funds in the joint account were all her personal property. The funds came primarily from her pension, her earnings and her tax refunds. She further said that she never consented to the arrangement and that her pension money was protected by law.

The Court agreed with the wife. She was not part of the agreement between her husband, Bank of America and the other parties. She clearly never forfeited her rights to her funds simply because her husband put up their joint account as collateral for the lease. Finally, under the law, Bank of America had to prove that the assets in the account belonged solely to the husband, which it could not.

This case provides some key points about joint accounts for those of you who have them or are considering them:

• A court will not always uphold using a joint account to secure a debt that belongs only to one of the individuals

• Someone who has a debt secured by a joint account must demonstrate that the assets deposited belong primarily to the individual who owes the debt

If you have more questions about your joint account, reach out to an attorney to advise further.

Angela Yu is a New Jersey and New York attorney with a multifaceted practice area focusing in corporate, real estate and general contract law. She uses her interest in real life application of the law to author articles and other scholarship on a broad range of cutting-edge legal and business topics. Ms. Yu is a published legal author and holds a J.D. and M.B.A. from Rutgers School of Law and Rutgers Business School. Neither she nor Mike Farhi provides legal advice on this website. This blog post and any blog posts do not constitute legal advice.