B is unlikely to be happy with joint account funds bypassing their parent’s estate, because: In some cases, it is possible to challenge survivorship rule, because it is not clear what part of the joint account funds each account holder is entitled to, or there was no joint intention that, on the death of one account holder, the survivor would automatically receive the value of the entire account. It is a limited liability partnership registered in England and Wales under number OC321318. HMRC pays close attention to joint accounts after a death, particularly if there is a significant amount of tax at stake. This in itself has inheritance tax consequences and may also be relevant for income tax purposes. This meant that they should pass to Mrs Stain after Mrs Cotton’s death and the joint account funds did not form part of Mrs Cotton’s estate. The account contains the parent’s life savings of £500,000 and A makes no payments into the account. These include quantifying the extent of the deceased's share of the funds, identifying who is entitled to receive those funds and ascertaining the inheritance tax treatment. the name of the other account holder and their relationship to the deceased; the date on which the joint ownership began; how any income from the account was dealt with. The accounts contained around £51,000, but the deposits were only made by Mrs Cotton. Who owned the funds that were deposited into the joint account – if only the parent deposited their solely owned funds to the account, then the ownership of the funds may have been intended to remain with the parent by contrast to both the parent and the child contributed to the joint account where the ownership was likely intended to be truly “shared” or joint; Other joint account holders will usually hold the funds as "joint tenants" and will also be taxed equally on the income unless in fact they hold the funds unequally as "tenants in common", in which case they will be subject to income tax on their share of the interest. The parties' intentions are key but ideally the position should be properly documented. It is not uncommon for elderly parents to ask one of their children to become a joint signatory on their bank account, to assist them in operating the account as they get older. Many couples have joint accounts to make paying bills and arranging household finances easier. Would it be fair in this example for A to receive the joint account, or should the joint account funds form part of the parent’s estate? Normally, the balance in a joint account will pass to the surviving account holder on death by right of survivorship, outside the terms of the deceased's Will. A real life example of such a challenge is the case of  Drakeford v Cotton [2012] EWHC 1414 (Ch), where the High Court had to consider who would receive the funds held in two joint accounts. a couple may use a joint account to pay their mortgage instalments, or an elderly parent may have a joint account with their adult child. Compliance Officer for Legal Practice: Matthew Barrow (Partner) - See more on the Lester Aldridge Privacy Policy | Crafted by Upperdog. Mention any joint accounts to your solicitor when making your will and what you want to happen to the joint account in the event of your death. If the funds are owned in unequal shares, they will still be taxed on the 50/50 basis unless they make a joint declaration to be taxed according to their beneficial interests. A joint account is a bank or building society account which is held in the name of two or more people. However, it is important to: Our Disputed Wills Team advises about disputes involving joint bank accounts after death. However, there was a dispute about who owned the funds and whether Mrs Stain should receive these, or whether the funds would be shared equally between Mrs Cotton’s three children under her will. Joint accounts are common between spouses and civil partners. Mrs Cotton died in 2008 and, under the survivorship rule, the usual position would be that Mrs Stain would receive the funds in the joint accounts. requiring both account holders to agree to any withdrawals; and. The parent’s reason for adding A to the joint account was only to help them with online banking. Consequently, there is often no need to wait for probate; the survivor will simply provide the death certificate to the bank and it will transfer the money into the survivor's sole name. There is a long line of cases on joint bank accounts with a variety of different outcomes as each turns on its own facts. What Happens to a Joint Bank Account When One Account Holder Dies? This type of account can be used for lots of reasons, e.g. Another recent case, Pflum v HMRC [2012] UKFTT 365 (TC), concerned the question of whether withdrawals from a joint bank account were taxable remittances. It was agreed that when the joint account was established, the deceased had not intended to give her daughter a beneficial interest. An account which was funded entirely by a non-domiciled UK resident was drawn on by his girlfriend in the UK. The net estate is worth £40,000, with A and B each receiving £20,000. This might be because of: This blog focusses on what happens to a joint bank or building society account when one account holder dies. Email: bh@boodlehatfield.com, 6 Grosvenor Street London W1K 4PZ, 6 Worcester Street Oxford OX1 2BX, Boodle Hatfield LLP ™ © 2018 Made by Precedent, +44 (0) 20 7079 8286 / +44 (0) 7794 658286, +44 (0) 20 7079 8177 / +44 (0) 7947 069642, +44 (0) 20 7079 8104 / +44 (0) 7794 658104, Legal Notice, Complaints Procedure, Cookies and Privacy Statement. An elderly parent has 2 children, A and B. They are not greatly interested in joint accounts held by spouses and civil partners where funds passing from one spouse or civil partner to the other are normally 100% exempt from inheritance tax. When that occurs, the funds in the joint account will usually automatically pass to the surviving account holder by what is known as ‘survivorship’. Lester Aldridge LLP is authorised and regulated by the Solicitors Regulation Authority (SRA ID: 463177). 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