Joint bank account requirements for siblings: What you need to know

You watched your older sister grow up and move out. Now it's your turn! As close siblings, you're planning to share a place while attending college. The excitement mounts as you picture fun nights on the town and your very own place.

There's one hitch — you're responsible for your share of the expenses. That includes rent, food, and utilities. To stay on top of finances, your sister proposes opening a new bank account — a joint one that you'll share. But how does that work, and what joint bank account requirements do you need to meet? 

What is a joint bank account?

There are several types of bank accounts, including joint and individual accounts. A joint bank account names two or more people as the account holders. Each person can add, withdraw, or transfer funds from the account. That's different from an individual account, where only one person has control over account activities.

Another difference is insurance. Individual accounts include Federal Deposit Insurance Corporation (FDIC) protection for up to $250,000. On a joint account, each account holder receives up to $250,000 in FDIC protection. That means the joint account may be insured for $500,000.

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If a joint account holder dies, their ownership right goes to a designated heir or the surviving account holder. For individual accounts, ownership passes to a named beneficiary.

Benefits of a joint account for siblings

Joint bank accounts are common among people who share expenses. That includes couples, roommates, multigenerational families, and siblings. A joint account can:

• Simplify budgeting and payments: Deposit money toward shared expenses and pay them from one account. This hassle-free approach means fewer cash app transfers and friction. If you have direct deposit, you can specify an amount to go into the joint account for monthly bills.

• Provide built-in transparency and accountability: View deposits, transfers, and withdrawals whenever you like. Both account holders have full access to account activity, so you'll know when funds are there to pay bills (or the balance looks a little lower than expected). 

• Foster long-term collaboration: Sharing finances with a sibling strengthens trust and builds on the family values you grew up with. These strong ties stay with you for decades, even when you venture on your own later on.

Drawbacks and risks to watch out for

A shared bank account gives both account holders ownership of the funds, which can be a problem if you disagree on how to spend the money. Say that your sister decides to book a Caribbean vacation using the joint account. Unfortunately, there's not much you can do since she's an account holder.

Another drawback is the risk of overdrafts or insufficient funds. This can happen if you spend money without telling each other. Say that you both write a check for the monthly rent. If there's not enough in the account to cover both checks, one will bounce. Most banks charge a fee for overdrafts or insufficient funds. 

Both account holders are also on the hook for bank fees and other expenses. This financial and legal responsibility stays even if you aren't responsible for a transaction. 

Thankfully, however, these pitfalls are avoidable with good communication. Have a heart-to-heart talk with your sibling about your expectations and set some spending guidelines before opening a joint account. If you're both on the same page, any problems you encounter should be minimal. 

What do banks require to open a joint account for siblings?

What is required to open a joint bank account? Every bank has its own qualifications for opening an account, but most ask you to bring the following:

• Identification: A government or state-issued ID, such as a driver's license, identification card, or passport.

• Proof of residency: A document that shows your current physical address. A rent agreement or utility bill will usually do the trick.

• Minimum deposit: A cash or check deposit based on the bank's guidelines. The amount varies, so check with your bank to find out how much money you'll need.

Some banks let you skip the in-person visit and open a joint bank account online. This comes in handy if your preferred bank doesn't have a local branch. It's also useful for busy siblings with conflicting schedules. If your bank allows online account setup, plan on uploading copies of your identification and residency documents.

Types of joint accounts siblings can use

All joint bank accounts give account holders ownership over funds. They can deposit, spend, and transfer money in the account. If one of the account holders dies, survivorship rights vary between types of accounts. Most banks give you several options to choose from when setting up a joint account. They include:

Joint tenancy with rights of survivorship

This is the most common form of joint bank account. If an account holder dies in this arrangement, the surviving account holders get complete ownership over the remaining funds. 

Tenants in common

A tenants in common account doesn't automatically transfer account ownership to the joint owner. Instead, ownership goes to a designated heir. 

Convenience account

Convenience accounts are popular with people who need help managing their money. They let the original account holder appoint someone to deposit, withdraw, or write checks for them. If the account holder dies, the appointed individual doesn't get ownership of the funds. Instead, ownership goes to the original owner's designated beneficiary or heir.

How Greenlight can support siblings managing money together

Greenlight, the #1 family finance and safety app, has the tools you need to manage cash with your favorite sibling. Our app gives you real-time insights into how you spend and save. Plus, you can set your own guidelines, with custom permissions for withdrawals and debit card usage. 

Manage your money and safety. Ask your parents about Greenlight’s money and safety app for families. Invite them to sign up for Greenlight one month, risk-free.†