More often than not, you have been advised to open a joint bank account. Apart from this you have always been asked to opt for "either or survivor". But, these are not always free from risk.
Let's cite an example why joint bank deposits and joint bank accounts are not free from risk
Let's say Usha's husband was not in town and she decided to open a joint bank account or a joint fixed deposit with her brother. She opened the account and the account stayed that way. Suddenly, Usha passed away. Now, the brother staked his claim to the bank deposit.
The bank would not allow the husband any share in the proceeds of the joint deposit or the joint bank account. The legal heir, who in this case was the husband cannot stake his claim until and unless the brother also passes away.
The bank will stop the brother from operating the account or giving him the proceeds, only if the husband produces a court order that restrains the bank in doing so.
Let's take another example...What happens if a mother has three sons and two of them are abroad. She would be forced to open a joint account with "either or survivor" with the son who is staying with her. What happens if he does not share the proceeds with other brothers on demise of his mother. Interestingly, the brother can get the proceeds from the bank, even before the other brothers know of a deposit that existed. Court orders are also likely to take time and hence if it was the intention of the mother that all share the proceeds equally, that might just not happen.
Read more on types of joint accounts here
These are just two examples and you may have issues also with:
1) Aged parents and grown-up children.
2) Couples in a live-in relationship.
3) Business Partners
4) And when there are minors involved.
Now, this was in case of "either or survivor"
What happens when one chooses joint account with ‘former or survivor' option
In the above case, the second holder can operate it only on death of the holder. This creates more worries and serves very little purpose once again.
One needs to mention the type of joint account holding, when one opens the account. It can only be changed on the written consent of the joint holders.
There are also no tax benefits in opening a joint account. For example, the income is deemed to be of the first holder and he is taxed accordingly.
On the other hand, the second holder can easily stake his claims on the death of the first holder, by never paying tax on interest income, in case of a fixed deposit.
Though we have just mentioned the pitfalls of joint accounts, it's still the best option around. At least the money would go to somebody instead of nobody.
In India, there are very little option and "the either or survivor" continues to remain the most preferred option.