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Can You Open a Joint Brokerage Account?

If you’re in a long-term relationship, you’re likely thinking about combining your finances together. It makes practical sense.

Whether you’re a newlywed or have been together for years, managing your money together improves transparency between you.

And, it helps ensure you’re both aware of your entire financial situation, so you can better plan for the future.

Joining your finances together can be a good thing, but what about opening a joint brokerage account? 

While putting two people on a single brokerage account can streamline your investments, there are some downsides to consider.

Continue reading to find out if opening a joint brokerage account is right for you.

What Are Joint Brokerage Accounts?

When you open a joint brokerage account, two people can save their money and make progress toward their financial goals together.

Both holders of a joint account have ownership of the assets in the account.

Each person can transfer funds, make allocation changes, and view the current balance.

Because you both have equal ownership, you don’t need to get consent before making any changes or withdrawals. 

Beneficiaries

Opening a joint account is different than simply naming a person as a beneficiary.

A beneficiary only has access to the account if you pass away.

While you’re alive, the beneficiary can’t view the account, make changes, or transfer money. With a joint brokerage account, the other account holder has equal control. 

Rights of survivorship

Many joint investment accounts have rights of survivorship.

That phrase means that ownership of the account goes to the surviving account holder if the other person passes away. 

Joint brokerage accounts aren’t available for tax-deferred accounts or retirement accounts such as a Roth IRA or 401(k)

Setting Up a Joint Brokerage Account

Setting up a joint brokerage account is fairly simple. 

While many people who open joint brokerage accounts are married, you don’t have to be to open a joint account.

You can open a joint brokerage account with anyone you trust, including a partner, parent, sibling, or even a close friend. 

Most brokerage firms, including robo-advisors, offer joint brokerage accounts.

You can open an account with companies like Betterment, Wealthsimple, or Vanguard. 

In most cases, you can invest in different types of securities, such as mutual funds, exchange-traded funds (ETFs), individual stocks, and bonds.

However, some online brokers limit your investment options, so make sure you review their offerings carefully. 

To open an account, you’ll need basic personal and financial information about each account holder.

In general, you’ll need to provide your Social Security number, birth date, address, employer names and address, and banking information to fund your account.

Pros

There are three main advantages to opening a joint brokerage account: 

1. You can work toward common goals

With a joint brokerage account, you can work together to save and invest toward a common goal.

Whether you’re saving for a new home, planning for retirement, or simply looking to grow your money, you can pool your resources together to help you reach your goals faster.

2. One person can manage the account 

When you invest in a joint brokerage account, you can combine your money for investing purposes.

But, you can decide to have one person manage the account.

This approach is a smart option if one person wants to invest, but prefers to be more hands-off.

3. You can keep assets out of probate

If you have an individual brokerage account and pass away, the account will pass to your beneficiary through your will.

However, it will likely go through an extensive and sometimes expensive probate process before your beneficiary can receive the money. 

A joint brokerage account bypasses that problem. With a joint brokerage account, the account goes to the other account holder if you pass away, with no need to go through probate. 

Cons

While opening a joint brokerage account can be a good idea for some, it’s not for everyone.

There are three major downsides to consider:

1. Share responsibility for assets 

With a joint brokerage account, the invested assets belong equally to both account holders.

That can be a problem if one of the account holders is in debt and has creditors come after them. 

Creditors could seize the assets in the joint account, even if you had nothing to do with the debt.

Opening a joint brokerage account, rather than keeping your accounts separate, exposes you to additional risk.

2. No permission is needed to make changes

If you plan on opening a joint brokerage account, you need to trust the other person completely.

The other account holder is an equal owner of the assets and can make changes to the account without your permission. They can even empty out the account without your consent, which can be a problem if your relationship deteriorates. 

No one wants to think that their relationship could change.

Unfortunately, divorce and family strife is common, so it’s important to think about the worst-case scenario when it comes to your money.

3. Tax issues

If you open up a joint brokerage account with anyone besides a spouse, you could cause a gift tax issue.

If the contributions exceed $15,000, you may need to file a gift tax return, and you may need to pay costly taxes.

If you plan on opening a joint brokerage account with a sibling, child, or friend, it’s a good idea to consult with a tax professional or Certified Public Accountant before proceeding.

Investing Your Money

If you want to invest your money with a loved one and streamline your finances, opening a joint brokerage account can make a lot of sense.

However, there are some downsides to keep in mind, so make sure you do your homework before opening an account. 

If you decide to open a joint brokerage account, check out the best online brokerage accounts to help you get started.