7th Mar 2018

Joint bank accounts – who does the money really belong to?

It’s a fact that many of us have joint bank accounts. The flexibility that these shared arrangements offer can simplify the management of household, family or even some business finances, but in the event of a death of one of the account holders, who does the money actually belong to?

A recent decision by the Privy Council stated that funds held in a bank account passes by survivorship to the surviving joint account holder(s) and that it does not form part of the deceased person’s estate. 

The reason for this is simply that the terms and conditions of most joint accounts state that the money will be held in this way – unless it is otherwise agreed in writing.

In many cases, this will have been in line with the intention of the account holders – particularly in the case of a husband and wife who both use the account regularly. However, there are other circumstances where people add another person to their sole account.

It is not, for example uncommon for the child of an elderly person to have their name added to their parent’s account to help them manage their finances. This can be a practical step, but if the child is added to the account without the parent setting out separately that the money was is solely theirs, these accounts would pass to the child outright on death, regardless of whether the deceased made a Will stating that their assets should pass to another person, or other people.

As we all know – it is very easy not to read the small print, so people may not realise what they are agreeing to. As this example highlights, it is important to be extremely careful about adding someone to a joint account unless you intend for them to inherit the contents should you die. 

In such a case, there -may be a better way of enabling a family member to assist with finances, such as by signing a Lasting Power of Attorney. This document would allow nominated attorneys to manage bank accounts and other affairs but would not involve the accounts becoming joint. For many, this could be a preferable way to manage finances.

Julie Hutchinson is an Associate Solicitor within Berwins’ industry rated Life team

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