Joint Bank Accounts

Published on 7 Sep 2023

Although joint bank accounts often automatically pass to the survivor on the death of the other account holder, this need not always be the case. It depends upon the facts and the circumstances, including who provided the funds in the account and the intention of the account holders. Careful consideration of the account may be required after death.

For example, a joint account may have been created as a convenient and inexpensive way of paying bills and expenses for an elderly relative who is struggling to manage their financial affairs, with the money in the account belonging solely to the elderly relative. When the elderly relative dies, the funds in the account will be treated as though they belonged to him alone where only the deceased had the power to decide what to do with the funds in the account. The full value of the account will form part of the deceased’s estate. This can affect inheritance tax payable on the estate and HMRC can investigate and potentially challenge the underlying ownership of a joint account. In a case where the deceased held two accounts jointly with his daughter, the court held that although the daughter inherited these accounts by survivorship on his death, since she had been unaware of the accounts prior to his death they formed part of his estate for tax purposes.

Also, where one joint account holder provided all the money in the account, then if the other joint owner withdrew money for their own use, those withdrawals may be gifts and should be notified to HMRC.

The personal representative of the estate has to decide who is to benefit from the jointly held asset and in what proportions. The usual approach is to presume that the money belongs to whoever put it into the account. However, sometimes the courts have to decide whether the funds in the account pass by survivorship to the remaining account holder.

Determining whether or not the money in a joint account passes by survivorship to the remaining account holder may also affect the deceased’s beneficiaries. For example, the deceased may have made a will leaving their estate equally between their two children. However, if the deceased and one of their children held a joint account, deciding whether or not the money in that account passes by survivorship to the surviving account holder could have a significant effect on the inheritance received by the other child. The crucial question is whether the survivor holds the account money for himself or on trust for the deceased’s estate.

Evidence of the intention of the parties providing the funds can also be important. Sometimes the account holders intend that the survivor will receive a gift of whatever monies are held in the account at date of death, even if only one of them provided the funds. The intention is that the other account holder will not use any of the money in the account but will inherit the whole of the account on the death of the one who provided the funds.

Other complications can sometimes arise. For example, if two people open a joint bank account and complete a standard application form dealing specifically with the underlying ownership of the money, the application form prevails, notwithstanding any contrary intention on the part of the account holders. Thus, the parties may intend between themselves that the account holder who provides all of the money in the joint account is solely entitled to it but account application forms will take precedence even if they state something different.

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