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Difference between Joint Account and Beneficiary Account
Over the past few decades, there has been a sea change in how financial services are delivered to customers. Because of this, people are less likely to be wary about putting their money in banks to make a withdrawal at a later date.
The banking industry has also provided several account options, so customers can access services and products that best suit their needs. For instance, joint accounts make it possible for many people to aggregate their money into a single account and then agree on the terms under which that money can be accessible. Those designated to receive funds from beneficiary accounts might be given permission. Learn more about beneficiary accounts and joint accounts in this article.
What is a Joint Account?
When two or more people share ownership of a bank account, the account is said to be in the form of a joint account. Couples, families, or coworkers often create these bank accounts. You must have trust in the persons you choose to have access to the funds in this type of account. Contrarily, the conditions of each account detail what happens to the assets or funds in the case of the death of a joint account holder. In addition, it is common practice for all group members to sign off on every transaction. Each participant must pay their fair share of any fees or charges.
When two persons maintain an account jointly, they have the option of using either a "and" or a "or" to separate their names; however, if the account is marked with a "and," both account holders must sign any documents related to the account. With "or"-designated accounts, just one signatory is needed. Temporary joint accounts are an alternative to their permanent counterparts.
The fact that all account holders have free access to the account's funds and the risk of paying additional expenses are two potential drawbacks despite the many benefits of having a joint account. The government can seize property to collect back taxes, child support, or other monies owed to the state.
What is a Beneficiary Account?
In the case of the primary account holder's death, the funds in these accounts will be distributed to the beneficiary(ies) named by the primary account holder. Although beneficiary accounts are often overlooked, they are crucial. They serve to protect the deceased's assets, avoid the probate process, and provide the beneficiaries with favorable tax treatment.
Different types of beneficiary accounts are as follows −
Accounts designated as "Payable on Death" (POD) allow the owner to name a beneficiary who, upon the owner's death, automatically becomes the account's legal owner. Only the receivers' information has to be filled out on a form. The beneficiary will not have access to the account while the primary account holder is still alive. As a result, the primary owner can change the designated beneficiaries at any moment.
In the same way that a beneficiary can be designated for a Payable on Death (POD) account, a Transfer on Death (TOD) beneficiary can be designated for investments such as bonds, stocks, and mutual funds only liquidated upon the death of the account holder.
Similarities − Joint Account and Beneficiary account
There is no requirement for the primary account holder's estate or beneficiaries to go through probate when the primary account holder dies.
Differences − Joint Account and Beneficiary Account
The following table highlights how a Joint Account is different from a Beneficiary Account −
|Characteristics||Joint Account||Beneficiary Account|
When two or more people share ownership of a bank account, the account is said to be a joint account.
When someone sets up a beneficiary account, they name another person or entity to get the funds in the case of the account holder's death.
Access to funds
It may be necessary to obtain signatures from all account holders to withdraw funds from some types of joint accounts.
It is only after the death of the primary account holder that the beneficiary will be able to access the funds in the beneficiary account.
When two or more people share ownership of a bank account, the account is said to be a joint account. As a result, collecting signatures from members is essential to access the funds.
In contrast, a beneficiary account names a specific person or organization to take possession of the funds in the case of the account holder's death. Only the beneficiary can access the funds when the account holder passes away.
Neither of these choices, however, will initiate the probate procedure in the event of the death of the primary account holder and the designation of beneficiaries.
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