To Merge Or Not To Merge

Inspired by a recent comment, I thought I'd address the whole thorny issue of joint bank accounts between sweeties. I cannot count the number of times I've seen trite posts in my feed aggregator saying extremely stupid things like "what's the point of getting married if you aren't going to share finances?" Yes, I would snicker to myself, what could possibly be the point of entering into a culturally, personally, and religiously significant union with another person if not to administratively add that person's name to all my financial accounts? After all, isn't the real proof of true love... paperwork?

The truth is, there are some real pros, as well as some serious cons, to using joint accounts with your partner. And while I think it's always wise to be cautious before deciding to combine accounts, this does not in fact cut the other way: people who have kept their accounts separate have not necessarily done so because they are cautious about the relationship. Anyone who thinks otherwise deserves to be laughed at.

So that's my disclaimer.

OK, so. First of all, what is a joint account? It's a checking or savings account with two people's names on the account. Both people are allowed to make deposits or withdrawals just as they could with their own, individually owned account. You don't have to be married, or living together, or dating, or really have any relationship of any kind in order to qualify for a joint account (I still have one with $25 in it with my dad at his credit union, just for old times sake, and because they have great rates for members should I ever need a car loan). You just have to fill out the right paperwork together with the bank. Obvious enough, yes?

But one fun fact that is less widely known about joint accounts is that so far as the bank is concerned, either person is 100% entitled to 100% of the money in the joint account at any given time. The bank doesn't care who earned the money, or who deposited it, or what sort of understanding the two accountholders had between themselves about who controlled what portion of the assets. The bank certainly doesn't consider the assets subject to a 50/50 split. This means that so far as the bank is concerned, either person could walk into a branch and clean the whole thing out, no signature or pre-approval from the other person needed. Have you been following the latest C-list celebrity gossip, in which Jon Gosselin (he of Jon & Kate Plus 8 infamy) has allegedly cleaned out the joint account for household expenses that he has with his wife Kate, presumably to buy some more manboy clothing or swag for his new girlfriend? Again, so far as the bank is concerned,* that was totally fine by them.

From this, we can take several lessons. One, don't marry a douchebag. Two, never keep joint accounts with someone who is not extremely trustworthy and responsible. Because you can get really, really burned.

But we're in love! you say. Well, so you are. But even so, should you merge all your accounts? Depends on the circumstances, and on your personalities.

Pros
1) Having simultaneous access to the same funds can make paying joint bills really easy. There's no cutting someone else a check for half the rent every month, or any of that "I'll take the phone bill, you take the electric bill" which seems like such a good idea until your running the AC every day and then whoever is paying for electric starts to feel like she's getting stiffed. Both people can put money in, and both people can send the money out.

2) There's transparency. Both people can see where all the money in the account is coming from, and where it is all going. This is really nice for control freaks such as myself, as well as people who feel like hey need to check up on their partner. Actually, this is something that always makes me chuckle when people say that keeping separate accounts is a sign of distrust between partners. Oh yeah? Well, how much trust can there be if you have to be able to see where all her money is going? Snarky, yes. But snark is not given, it is earned.

3) If one of you gets hit by a bus, the other one can make sure the bills are still getting paid. The same thing can be achieved by having a Power of Attorney naming your sweetie as your agent, but there will be a little less hassle involved if the accounts are all joint because you won't have to trot down to a local branch during business hours and stand in line to wave your PoA around.

4) You feel like a team. This one may or may not hold true for you. Obviously it holds sway for some people, hence all the self-righteous my-way-or-the-highway blog posts I've seen. Personally, I feel a greater sense of teamwork after an afternoon of shared yard work with Shiner, but to each her own. If you get a warm fuzzy feeling from thinking about joint accounts, that's a worthwhile feeling to listen to.

Cons
1) Inertia. You probably each had bank accounts before you met one another, and you know what they say about what to do if it ain't broke. Merging them requires a trip to the bank, which is such a waste of a Saturday morning.

2) Don't merge accounts if one of your has had problems with identity theft or collections agencies. Because the bank considers all assets in the joint account owned 100% by each of you, that means an identity thief or creditor trying to garnish your account can get access to much more money if you pool your assets in a joint account.

3) If you're not on the same page and don't keep a healthy cushion in the account, it's not that hard to accidentally overdraw your account.

4) There's no secrecy with a joint account. No secrets means no surprises when you open your birthday present. If you subscribe to the method of budgeting where each person gets some amount of no-strings-attached mad money, it means I have to confess the outlandish amount of money I spent on yarn last week, or pretend not to think it's a bit silly when I see how much Shiner has spent on brewing ingredients this month. That's not the kind of transparency that would be useful in my relationship.

5) You feel a sense of independence. Maybe. If that's the way your personality skews.

6) See worst-case Jon Gosselin scenario, above.

How to Strike a Balance
Oh, hell if I know. I can tell you what we've done, which is a classic Third Path scenario, and one that is still somewhat in flux as we approach nearly a year of being married.

We opened our first joint account the same month he moved in. We already banked at the same place, so having a joint checking account there meant we could transfer money to and from our sole accounts in a matter of seconds. Every month when we did bills, we'd each transfer in 50% of our gas, electric, cable/internet, water and trash bills, and all those bills would be paid from the joint account. He'd transfer in another $500 in lieu of rent, which I'd pull out into my sole account and put toward my home equity loan. Over the years as we've become more entwined we've added more bills to our list of joint expenses: phone, Netflix, car insurance, and certain one-time expenses like a couch and a chest freezer. All our other expenses (even things like groceries and going out, which are every bit the joint expenses that our electric bills is) are put on our individual credit cards for rewards and paid of from our sole accounts. If we end up taking out life insurance in addition to what we have through our jobs, it will come out of here, too. That's the inertia talking.

We now also have a joint savings account, but because he was paying off debt and is now catching up on his Roth IRA contributions for the year, I've been the only only one contributing, though by the end of the year that will change. I didn't add him until after the wedding, though. Geez, I wanted to save something for the wedding night.

But we each still have our sole checking accounts, he has his sole savings account (mostly for major beer-related purchases) and I have all the same savings accounts I had before we got married. We've only added his name to one of the three of them. He's named on my Power of Attorney, so he could get at any of the money if he needed to, but for now he doesn't need to get at the money I'm saving toward a new suit (what the remnant of my first emergency fund has become), and to be perfectly honest it took him paying off the rest of his credit card debt and me sitting with the idea for seven or eight months before I started re-thinking the way I look at my Single Gal Savings Account--money I saved while I was single, and to be used as a lifesaver should I find myself single again. After all, nobody gets married thinking they're going to get divorced, and a good portion of the optimists are wrong. But now I mostly think of that account like my retirement accounts--Money To Be Ignored For The Present. I guess in a pinch it would be a second emergency fund, but mostly I like to forget that it's there. In my ideal world, we'd both have savings accounts like this, but because he spent himself way down to pay of his debt faster, he doesn't.

I am a big fan of the Yours-Mine-Ours scenario. It's worked well for us. It's been very flexible as we decide that certain expenses should now be considered joint, while still giving each of us a lot of independence in prioritizing our own peculiar wants. We've gradually drifted more and more toward a shared scenario, which is fine--figuring out what works is a process, and we'll probably have to keep reevaluating it as our lives change--jobs, kids, whatnot. I like it because it hasn't been so rigidly all-or-nothing. We get the good parts of shared accounts and the good parts of separate ones. The important thing, obviously, is that we've come to a point where we're both on the same page.

* I keep saying "so far as the bank is concerned" because if Jon Gosselin gets in trouble, it will be on the family law side of things, not the banking law end. Since they were legally married in Pennsylvania and had legally separated, the court had ordered them not to make any unusual withdrawals from the joint accounts. But if they hadn't been married, or if their marriage wasn't recognized in Pennsylvania, or if they hadn't been in the process of divorcing such that the court had stepped in with additional protections, him (allegedly) wiping out their account would be just fine and dandy.