Joint Bank Accounts

WHAT YOU SHOULD KNOW ABOUT JOINT BANK ACCOUNTS IN MALAYSIA

Lately, I received some updates circulated via the net about the dilemma of a Malaysian who could not access to the money kept in a joint bank account after demise of the other joint account holder who was her spouse.  The widow, of course, expressed her disgust over the seemingly unfair restriction to her rights as the survivor who should automatically be entitled to the savings in the joint account which had been set up for their mutual convenience. Apparently, the bank immediately froze the account upon being notified that her husband had passed away.

A friend of mine, like many others who shared their comments, contended that the case sounded illogical. He argued that if the said episode was true, then it would be more practical for married couples or family members to open separate personal accounts instead of a joint account. It was not for me to comment immediately whether the cited episode was actually related to the prevailing practice applicable across the board to the banking industry or only to some banks. Being inquisitive, I was curious to find out more about the subject.

But I do recall clearly a relative of mine who had no problems of drawing money and giving instructions to the bank in which he and his parents had held joint accounts (one with his father and another with his mother) without their expressed consent or presence at each time. He could continue to operate the joint accounts even after their demise without questions (about his parents) from the bank.

So, what is the actual banking practice and treatment with regard to status of a joint account in event of death of one of the joint holders in Malaysia? 

I searched through various sources for more information. My search tells me that different banks may have different arrangements for joint accounts. It boils down to the joint account agreement drawn with a bank – whether all transactions pertaining to the account require the signatures of both holders or whether either party can act on behalf of the other. A couple of sources say some foreign-owned banks allow joint tenancy accounts or option for incorporating a survivorship clause which automatically grants the surviving holder full rights to the account, however such kind of arrangement may not be available in local banks. Another source says many banks have the “either-or” arrangement; by this, either party of the joint account can withdraw money. Yet another source says that In event of demise of one party, the surviving counterpart should “silently” withdraw from the account until the minimum balance of RM10. He cautions that if the bank knows about the death of one joint holder, it will freeze the account.  The source adds that some banks assign certain staff to look at obituaries to check against any deaths of account holders. On this, I checked it out with a contact of mine who was in the banking industry, and he responded affirmatively that some banks do assign staff for this purpose.

Interestingly, the website of a foreign-based bank with established operations in Malaysia declares the following relevant information regarding its services for joint account holders (I wish to paraphrase the statements):

Upon notice of demise of a joint account holder, the bank shall be entitled to pay the deposit, credit balance or investment, as the case may be, to the survivor; if more than one survivor, then in their joint names. The bank is authorised to set off the indebtedness of any of the joint account holders under any account with the bank. The bank may allow the surviving account holder(s) to continue to operate the account according to the terms and conditions. (Obviously this foreign bank practises joint tenancy or survivorship clause for joint accounts.) 

What about local banks? What are their usual terms and conditions pertaining to a joint account? One local bank spells out in its website two types of joint accounts with different terms and conditions. Let’s directly look at the declarations (again in my paraphrased format).

ACCOUNT OPERATED BY BOTH ACCOUNT HOLDERS:

If one of the joint account holders dies, the balance in the joint account shall be frozen until a letter of administration or grant of probate or land officer order or order from any of the relevant authorities is received by the bank to reactivate the joint account.

If upon death of a joint account holder, and the surviving joint account holder is a minor, then the account shall be frozen. The bank shall make payment of balance in the joint account to the executor or administrator of the deceased account holder and payment by the bank in relation to the balance amount in the joint account to the said executor or administrator shall be a complete discharge by the bank.

ACCOUNT OPERATED BY EITHER ONE OF THE JOINT ACCOUNT HOLDERS:

If one of the joint account holders dies, the balance in the joint account shall be held by the surviving joint account holder and payment by the bank in relation to the balance amount to the surviving account holder shall be complete discharge by the bank.

If upon death of a joint account holder, and the surviving joint account holder is a minor, then the account shall be frozen. The bank shall make payment of balance in the joint account to the executor or administrator of the deceased account holder and payment by the bank in relation to the balance amount in the joint account to the said executor or administrator shall be complete discharge by the bank.

It is evident that the second type of joint account (above) accords mutual flexible convenience to adult joint holders.

Yet another local bank is specific regarding joint account arrangements for priority customers, depending on their selected choice. Its website declares (please note again it is in my own paraphrased format) that where the bank is instructed and authorised to act on the instructions of any one joint holder of the joint account, the account(s) may be operated and/or closed by any one of such joint account holders. But where the Bank is authorised to act on the instructions of both or all of the joint account holders, the account(s) may be only be operated and/or closed by both or all the joint account holders as the case may be.

With more Malaysians using debit cards for purchase transactions, how do banks treat joint accounts with regard to availability of this facility? The question-and-answer (Q&A) segment of a local bank expresses that all joint savings or current account holders are eligible subject to the mandate either one to sign. Each joint account holder will be issued with a separate debit card.

Based on my findings, I conclude that family members who want to opt for joint accounts should first be definite of their mutual intent  and also be detailed enough to seek confirmation that the bank they choose to place their deposits in do offer the terms  and conditions suiting what they have in mind. 

One pertinent caution in respect of joint account relates to unresolved debt of one of the joint holders. There is nothing preventing a creditor to file a garnishee order in court (freeze and seize a relevant asset) on the joint account in order to recover the debt. If the order is successfully served by the creditor, the other joint holder may also lose money as both holders share equal ownership of the account. So, joint bank account holders – beware! If your joint counterpart has been silently accumulating debts outside without your knowledge, you may stand to lose all your share of savings in the account.

The end.