Tuesday, August 25, 2009

Why do you need a Bank Account in Joint Names?

I believe that this blog post may help you to understand significance of “Name” or “Account Holder” in YOUR bank account. Although this is technically a vast subject involving various laws (Acts) such as Hindu Succession Act, Indian Contract Act, Banking Regulation Act, etc., I have tried to pen down couple common cases applicable to most of us.
The objective of this blog post is to recognize benefits of having a bank account in joint names and with or without ‘Either or Survivor’ operating instruction.
Case 1 – Mr. Vinayak Deshpande (name assumed), age 30 years, Project Manager at Dattu Software Ltd. (hereinafter referred as DSL) Mr. Deshpande joined DSL 2 years ago and opened a bank account in AAICHIAAICHIAAY Bank. Bank’s representative (wearing a tie) took his signature on Account opening form, 2 photographs and copy of passport. Mr. Deshpande travel frequently outside India. He has a wife (not working/housewife) and a minor son. Mr. Deshpande is a careful person and never forget to sign 2 blank cheques before he leave his residence for foreign travel. His wife can use these cheques for household expenses during his absence.
In July, 2009, Vinayak went to Australia for a business trip. His wife made a mistake in writing the first cheque. She therefore, torn it and used the second cheque to withdraw cash. In last week of July, Vinayak was required to extend his travel and hence was unable to return till mid of August, 2009. Mrs. Deshpande who consumed all her cash during July, 2009 had no other option, but regrettably forced to borrow money from her neighbor.
Now, the question is – Do you want your spouse to face such situation? Of course NO (unless you had a dustup with her/him before travel).
Next question is – what would have avoided such scenario for Mrs. Deshpande-
Answer – A Bank Account in Joint Name with “Either or Survivor” feature. Such type of bank account is operated in joint names – Mr. and Mrs. Deshpande. Even though Mr. Deshpande goes to Australia directly from office…no worries for Mrs. Deshpande as she can also sign cheque and withdraw money.
Similarly, if Vinayak is not married, his parents can use his money and bank account without any dependence on him for signatures.
Another advantage is that – both Mr. and Mrs. Deshpande can use bank account passbook as his/her address and/or ID proof.
Case 2 – Mr. Marutrao Dagdogi Kamble (name presumed for example) , age 39 years, Purchasing Clerk at YZ International Corp. He has a bank account operated in his single name at Bank of Daroda. On 13th July, 2009 he died due to a massive heart attack, when his bank balance was INR 190,000. He has one minor daughter , wife and his elder parents. About a month after his death, his wife went to bank to withdraw money for an emergency use. Unfortunately, she returned with empty hands since bank officers asked her for few documents for compliance purposes. This includes marriage certificate, her ID proof and death certificate of Mr. Kamble. These documents help bankers to ensure authenticity of Mrs. Kamble as legal heir. As per most followed practices, every bank categorizes legal heirs in blood relation into six level categories such as First Level – Wife and Minor Son, Second Level – Son and daughters, Third Level – Parents and so on…. In case where a deceased person married to more than 2 persons (women or men and now Sec 377 also), death claim may move into the court of law.
If Mr. Marutrao Dagdogi Kamble had opened his Bank of Daroda Bank Account in Joint name with his wife, Mrs. Bakulabai Marutrao Kamble would have found it easy to comply with Bank’s Death Claim process. Note – It is mandatory for Joint Account Holder to inform bank about such death case.

To Sum up –
1. Joint Account – This is the type of bank account where more than one persons hold authority on the funds lying in the account.
2. Either or Survivor Feature – This feature/operating instruction on any joint bank account helps any of the account holder. The funds can be withdrawn by anyone of the accountholder with his/her sign only, whereas in case of death of any account holder, survivor can withdraw funds with his/her sign easily.
3. Bank Account Types – Typical deposit account types are Saving Bank Account, Current Bank Account (for businessman/traders), Fixed Deposit Account and a recurring deposit account. All such accounts are operated with account operating instructions as referred in #4 below.
4. Account Operating Instructions – a) Single: Only one person can operate the account b) Joint: More than one persons together can operate this account and c) Joint with E or S: More than one persons, where anyone or survivor can operate the account.
5. It is advisable to always open a bank account in Joint names for operational ease and may tick the box ‘Either or Survivor’ in account operation instruction section of application form provided you keep enough faith on the joint account holder.
6. Joint Bank Account does not entitle any of the holder or survivor for complete and exclusive rights on the funds. In case of dispute, the court of law may direct settlement/distribution of funds to survivor party or other party based on the facts and evidences of a court case.

Disclaimer – This blog post carries generic information on the subject. Every bank follows their own Death Claim Settlement process and anything contained in this blog post do not carry any legal meaning. Please consult your lawyer before relying on the information of the blog post. Objective of this blog post is to educate my followers on benefits of a joint bank account only. A complete technical guide on Joint Bank Account may be available in the market and/or website of country’s Reserve Bank or Central Bank.

1 comment:

  1. Great Note to educate people on having EorS account especially with spouse for emergency purposes. I have friends here who dont have their spouse as a second operator, not even they have a single add-on card for emergency if someone met with an accident. sounds like people still live as apes.