Consumer rights expert Martyn James explains everything you need to know about joint back accounts – and what to do if something goes wrong
When you meet the love of your life, you plan to stay together forever.
We might not think it in this day and age, but a surprisingly large number of people do just that – sadly, many others decide to call it a day as the years pass by. Sorry to be a bit of a downer – especially if you’re reading this while planning a wedding! Not everything in life will go wrong, but it pays to know what your rights are if things don’t go to plan.
Without a doubt, many of the most difficult complaints I’m asked to sort out relate to joint finances. This could involve sharing a bank account, but can also involve big money agreements like joint investments or pensions. These complaints can be exceptionally distressing, involving partners who vanish, are difficult, or in worst case scenario, are dangerous.
Having joint finances is not a bad thing – and there are often advantages to doing so. But it pays to know the catches when things go wrong. And without killing the romance, my number one rule when you share your life… is to have your own separate account for savings. Just in case. Here’s my guide.
Joint accounts and other agreements
You don’t have to be married to have joint or multiple financial agreements. A joint financial arrangement is basically any product where more than one person is named on the account or policy. There can be lots of different types of joint agreement.
For example, your bank account might be in both names, but your credit card might be in one person’s name, with a secondary card holder. Sometimes you might have joint financial agreements with friends or colleagues, for example, if you have flatmates and you want to set up an account to pay the bills.
How do joint financial agreements work?
With most kinds of joint financial products, you can usually set the rules around who can operate and change the agreement. When you sign up for a financial product, you’ll be asked if you want it to be set up so you both have to sign to release money or to make any changes. Alternatively, ‘either to sign’ which allows each person to operate the account individually which is more convenient but can lead to problems further down the line if you fall out with your co signee.
What can go wrong with joint financial agreements?
If a relationship ends, it’s often hard to talk about untangling your finances, but it’s vital that you do so. With a joint bank account, for example, you may find that your partner can transfer all of the money out of the account. It’s possible to extend an overdraft and max it out before the other person on the account realises too. Even that cheque book you’ve forgotten about can be used to deplete the cash in the account.
In the worst-case scenario, ex-partners have been known to take loans or second mortgages, cleared out savings accounts and trusts or applied for and maxed out credit cards or credit agreements. Faking signatures on accounts is, of course, illegal, but this is a reminder that you need to keep a close eye on your finances if you’re ending a relationship.
Should you find yourself in this situation then it’s vitally important you freeze all accounts and make an urgent complaint to the financial services provider and then on to the Financial Ombudsman. Ask the lender or financial service to suspend all debt collection and interest/charges while the matter is investigated.
Joint and several liability
If you have a joint agreement then you’ll often hear about ‘joint and several liability’. This means that when you enter into a joint contract with another person or people, you are responsible for the entire agreement if one or more of the other people fail to meet their obligations.
In simple terms, if your partner withdraws all of the money from your joint bank account overdraft and credit cards and vanishes, you are liable for paying off the debt if they can’t be tracked down.
My fellow TV legal expert, Gary Rycroft advises: “Prevention is better than cure, which means any one entering into joint financial arrangements for whatever reason (from sharing a house share to sharing your heart) should make a written record of what is agreed in terms of who is responsible for what – and if/when the situation changes how it will be amicably brought to an end. This could be just an email exchange or it could be a formal legal document called a Cohabitation Agreement. As ever in legal matters, evidence is key so make sure you have yours from day one.”
What happens when you report a relationship breakdown?
As soon as you or your partner report that there is a relationship problem – even if you mention it in passing – your bank or financial institution is obliged to ‘freeze’ the account straight away. While this will stop further spending on the account (other than previously authorised payments) you will not be able to unfreeze the account without the agreement of both parties.
This process of account freezing can also occur if your partner loses the mental capacity to make financial decisions and you don’t have a Power of Attorney in place. So again, it makes sense to think through your options on what you might do in the worst-case scenarios.
One way to avoid this is to ask the financial institution to change the agreement – though everyone on the mandate will need to authorise this. I’d recommend cancelling any forms of credit that come with the agreement, like cheque books, overdrafts or credit cards.
Financial abuse
Financial abuse is a form of domestic abuse and occurs when a partner, family member, friend or member of the public takes over your right to make independent financial decisions.
While bank staff are trained to look for signs of financial abuse, the lack of a branch network means that many people might slip through the net. Tackling financial abuse is something I feel strongly about. I would encourage anyone who is supporting a friend or family member through a relationship crisis to talk to them about their options. The free Government website, Money Helper, has a great guide to financial abuse and the help and support that is available.
- Martyn James is a leading consumer rights campaigner, TV and radio broadcaster and journalist
