You always thought that joint bank accounts were the most appropriate way to go about holding accounts. This may not always be the case. Here are a few reasons for the same. We wish to emphasize that while they are by far the best, there are still many loopholes.
Issues between legal heirs
Let us give an example. If two sons are abroad and the mother has made the third son, the joint holder of a big FD, on her death what happens?
If the two other legal heirs are not even aware of the deposits, they may not end-up getting their share.
They may need an order from the Court, by which time the bank would have paid the second holder.
Maybe used for recovery
If the second holder goes bankrupt, a bank deposit maybe used to recover and pay for the debts.
What if the second holder has not contributed towards such an FD?
Hassles with changing nomination
Say you have opened a joint account with your brother who is settled abroad. In order to change the nominee you would have to get his signature.
Change of nominee requires the signature of all the holders of the deposits. This can be painstaking at times.
Let us take the case of taxation on a cumulative fixed deposit.
The entire interest income is taxed on the first holder. If the first holder dies, the second holder inherits the entire FD amount without having paid a penny in taxes on the interest income.
He gets the principle amounts along with interest.
Various other relationship issues
There have often been joint account issues in between aged parents and children, couples in a live-in relationship, couples filing for divorce etc.
Does this mean you do not opt for joint account?
No, the advantages of a joint account far outweigh that of a single account. Though, adding a nomination to a single account is not a bad idea.
We have highlighted just risks
All of the mentioned reasons may not be applicable to all individuals. Your accounts must either have a joint holder or a nominee or even both.