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Where Taxpayers and Advisers Meet

IHT and Joint bank accounts

NeilD
Posts:7
Joined:Wed Nov 17, 2021 9:46 pm
Re: IHT and Joint bank accounts

Postby NeilD » Mon Nov 22, 2021 9:09 pm

@AGoodman and @Maths Thank you again for your replies.

You've raised a couple of points that I've done a bit more investigation on.

o Maths points about the distinction between the legal owner of the monies and the beneficial owner. Joint bank accounts in the UK are constructed under joint tenancy agreements between the account holders. This is a very powerful legal term and is generally buried in the terms and conditions of the bank account itself. Why is it powerful ? Because rather than being an agreement between the account holders and the bank, it's actually an agreement between the account holders themselves ! Furthermore, it would seem to have far reaching consequences should one of them die.

There's a piece of research done by a person at Bristol University [see link below] on a similar situation in the Bahamas where the judge overruled the perceived intention of the parties and went directly on the basis of the definition of joint tenancy as a point of law. It would appear to imply that irrespective of the intention of the parties, legal AND beneficial ownership of the funds in a joint bank account transfers under survivorship.

Given the above, on what basis could a claim be made by the deceased's estate against the sister for return of the funds ?

https://research-information.bris.ac.uk/ws/portalfiles/portal/161869036/Whitlock_note.pdf


o AGoodman, what you've said here appears to make logical sense but [given the above] is this situation not consider a gift from the deceased to her sister... albeit an unintentional one ? If that's the case, is it not considered a Failed PET in which case the estate would not be able to recover the IHT paid ? If it's not and the IHT ought to be reimbursed by the sister, then unfortunately it will be necessary to bring a legal claim against her to recover the funds. She is forthright unwilling to co-operate. I'm guessing it will need to be brought in the County Court or High Court [if it's the principal as well as the IHT].

maths
Posts:8420
Joined:Wed Aug 06, 2008 3:25 pm

Re: IHT and Joint bank accounts

Postby maths » Mon Nov 22, 2021 9:49 pm

Your link re Bristol doesn't seem to work?

I leave AG to respond to his bit.

maths
Posts:8420
Joined:Wed Aug 06, 2008 3:25 pm

Re: IHT and Joint bank accounts

Postby maths » Mon Nov 22, 2021 9:58 pm

I await a link re Bristol point.

An old person O has sole bank account. O is concerned she can't operate (eg write cheques etc). She asks her niece N if she can add N's name to the bank account so the eagle title is held by O and N.

However, O makes it clear to N that the monies will continue to belong to O, and N has no entitlement whatsoever to the monies. Indeed O and N execute a declaration of trust under which they (as trustees) declare that all monies in the account are held 100% beneficially for N.

O then dies.

100% of the monies fall into O's estate and IHT is payable thereon by O's executors and O's will sets out out who is to inherit the monies.
Survivorship does not apply re O's beneficial interest.

However, O's name is removed from the account's name leaving N's name (survivorship applying to the joint legal title). N however is simply a bare trustee.

maths
Posts:8420
Joined:Wed Aug 06, 2008 3:25 pm

Re: IHT and Joint bank accounts

Postby maths » Tue Nov 23, 2021 1:21 am

Managed to track the Bristol article down.

It doesn't change any of my comments above.

JPEP
Posts:2
Joined:Tue Nov 23, 2021 10:24 am

Re: IHT and Joint bank accounts

Postby JPEP » Tue Nov 23, 2021 11:04 am

I completely agree with the comments by maths.

I have actually had a case where a client passed away holding a joint bank account with a neighbour who was treated like their son and they had a genuine long lasting relationship as such. The account had a large amount of money in which was all deposited by the deceased. As already pointed out, the full amount was in the deceased's estate for IHT. The bank then took the view that the neighbour should not inherit under survivorship rules and was not really a joint owner. Instead, they were like a third party signatory. As such, the account exited the joint ownership and passed in to the estate's accounts for distribution. This decision was made by the bank. It would be interesting to know why she had a joint account with her sister and whether there was a power of attorney in place where the sister was an attorney.
Could the sister claim that the monies were gifted to her on the death of the deceased - even though that's not the case - and the situation would then be a failed PET.
- My understanding is no, you cannot have a PET where you retain benefit. I am not aware of an accidental or indirect gift being a qualified gift. It has to be made freely and without any reservation of benefit or GROB for short. A typical example of a GROB is when someone gives away their family home to their children to avoid IHT but continue living there. GROB rules apply and no IHT relief. I would say the same would apply here.

NeilD
Posts:7
Joined:Wed Nov 17, 2021 9:46 pm

Re: IHT and Joint bank accounts

Postby NeilD » Tue Nov 23, 2021 9:13 pm

Thank you for the excellent replies here.

Just to address some of the comments :

Maths points :

The 'O' and 'N' situation appears to slightly clearer in that the parties disclosed [and agreed in writing by executing a trust] their intentions prior to the death of 'O'. Their intention is that 'N' will never have a beneficial interest in the monies [was there a typo in your original post ?]. On the death of O, ownership of the account transfers to N [in reality the bank automatically closes the joint account and moves the funds to a new sole account for N]. If N decides not to return the funds to O's estate, then I would agree that the written declaration [the trust] will carry significant weight should the matter come before a judge.

Like most family situations, the sisters didn't put their intentions in writing. The deceased decided to open the joint bank account for convenience reasons. She ran a sole trader business and believed that she could protect this money by having it in an account that was not in her name alone. She had similar accounts with other family members. All of these accounts were funded by the deceased and all transactions [that we can see] were made by the deceased. The sister [and other family members on the other accounts] was there in name only and had no involvement in the account... until now ! The other family members have returned the funds in the other accounts to the estate. There was no power of attorney in place. The deceased was very active [with full faculties] up to her death.

So I guess in terms of a claim, it will rest on whether the deceased's behaviour/activity on this account [and the other accounts], including funding them, constitutes enough to trump the legal weight of 'joint tenancy' on the bank's terms and agreement. If you were a county court or high court judge, what direction would you find in favour of ?

JPEP's points :
It's very interesting that the bank actually did something like this. Was it definitely a joint account ? The bank will not even discuss the details of the joint account with the estate representative - and that would appear to be normal practice. They are happy to discuss any matters, release funds etc... relating to the deceased's sole accounts. Which leads me to another issue regarding the preparation of the court claim. Although the estate has some details of the bank activity [from paper statements etc...] it doesn't have everything. If the bank are unwilling to provide any information on the account to the estate representative, how can the estate or it's legal representatives get sight of that evidence ? Do they apply for a court order for the bank to release it ? Is there a process for this ?

In terms of the PET... what you've said here makes absolute sense. Making a gift is an intentional rather than an accidental action and the GROB is a great example of that.

Again, huge thanks for this guys [or girls :)].

AGoodman
Posts:1416
Joined:Fri May 16, 2014 3:47 pm

Re: IHT and Joint bank accounts

Postby AGoodman » Wed Nov 24, 2021 12:13 pm

It sounds like the funds never left the deceased's ownership and, if the family members all agree, it isn't something that is ever going to Court. For IHT just treat it as any other asset owned outright by the deceased.

NeilD
Posts:7
Joined:Wed Nov 17, 2021 9:46 pm

Re: IHT and Joint bank accounts

Postby NeilD » Wed Nov 24, 2021 5:28 pm

@AGoodman

Unfortunately the family member controlling the funds, the sister, is vehemently in disagreement with this position so it's almost certain to end up in court. Very sad. The estate will need to pay the inheritance tax, that appears to be unequivocal now. However recovery of the tax [and the funds] from the sister will need to be done via a court claim it would seem. Next step is to find a litigator specialising in this area of probate/IHT.


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