Q: My spouse and I want to start investing, and each of us has a few thousand dollars set aside to get started. Should we each open a brokerage account, or are we better off with one joint account?
Like most personal finance topics, there's no perfect answer for everyone, but I can give you a rundown of the benefits and drawbacks of joint brokerage accounts between spouses.
For one thing, joint brokerage accounts can make estate planning much easier. If the account is set up as joint tenants or tenancy by the entirety, the surviving spouse automatically takes full ownership of the account upon the other's death.
In addition, it can be more efficient to manage money that's in a combined pool. For example, let's say that you and your spouse both want to own Apple stock. By purchasing shares in a joint account, you'll only have to pay one trading commission instead of two.
Potential negatives include both spouses having full authority to make investment decisions in the account, which creates conflict more often than you may think. Additionally, joint accounts may be fair game for either spouse's creditors, so if one spouse defaults on a debt, their creditors can go after the entire joint account, regardless of who actually put the money in.
The bottom line is that a joint brokerage account between spouses is generally a good idea, provided that both are on the same page in terms of investment goals, and both spouses understand the risk posed by creditors.