Love, romance… and joint finances - Martyn James

Valentine’s day is on the horizon. No matter whether you are a hopeless romantic or a committed cynic about a day of celebrating love/enforced spending, we likely all agree spending your life with a partner is a wonderful thing. Being together forever means sharing lots of things including your finances. There are often advantages to doing this. But it pays to know more about how joint agreements work, just in case things go a little awry.

Martyn’s top tip

Having a separate bank account each – even if you have joint finances – is not an act of betrayal. It’s a sensible financial arrangement that every couple should consider. You never know what’s around the corner and if something unexpected happens to a loved one, you don’t want to be locked out of your accounts.

If you're mingling financial lives, account for a time you may not be together (Picture: Adobe)

How do joint agreements work?

The most common joint agreement is a bank account. With current or savings accounts and most financial agreements you can usually set the rules around who can operate and change the contract.

When you sign up for a financial product you’ll be asked if you want it to be set up so both people have to sign to release money or make changes to the agreement. More commonly, you can allow each person to operate the account individually instead.

Joint and several liability

“Joint and several liability” is a legal term that means 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 others fails 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.

Pensions

Pension problems can be particularly devastating. That’s because inheriting a work or private pension from your partner is not always possible if you don’t make specific arrangements. Your state pension will usually vanish when you die, too.

It’s usually workplace or private pensions that cause the most complaints. The holder of the pension may misunderstand how the pension works, fail to file the right documents or forget to amend the agreement. This means life partners can often find themselves out in the cold if the main pension holder dies. So don’t be squeamish about these vital agreements. Sit down with your partner and the documents and confirm with your pension company that both parties have access to the pension or annuity – in writing.

What can go wrong?

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, your partner can potentially transfer all of the money out (or spend it). It’s possible to extend an overdraft and max it out before the other person on the account realises, too. Even the cheque book you’ve forgotten about can be used to deplete the cash in the account.

In the worst-case scenario, I’ve seen cases where one partner has taken out loans or second mortgages, withdrawn 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 can be convoluted to untangle.

One last warning: if your partner vanishes, you will need to go to court to unlock access to savings and investments.

What happens when you freeze an account?

As soon as you or your partner report that there is a relationship problem your bank is likely to “freeze” the account. This will stop further spending (other than previously authorised payments) but you will not be able to unfreeze the account without the agreement of both parties. Financial institutions tend to be cautious when they are aware of relationship disputes and freezing accounts prevents legal battles further down the line. You can also formally request that an account be frozen, too.

I’d also recommend cancelling any forms of credit that come with the agreement, like cheque books, overdrafts or credit cards.

Martyn James is a leading consumer rights campaigner, TV and radio broadcaster and journalist. Read more from Martyn at this link.