Acrimonious will situation

[richfool]

Here is an interesting conundrum. I am curious as to how it can be resolved.

A relative, call her A, died a couple of months ago. She was married to B and her will says B is to inherit everything provided he outlives her by 21 days, or whatever. A is found to have a joint account with C, although C refuses to confirm she is the joint holder and the bank refuses to reveal who the joint holder is, or the account balance. My understanding is the default position is C would be considered joint tenant with A and so would be entitled to A's half of the account, even if this is not in the will. However, if this half does not pass to her husband B, then surely it must use up part of A's nil rate band, or if greater than the nil rate band, inheritance tax will be due? Even if the amount in the account fell within the nil rate band, surely the amount needs to be established as it will reduce the amount of nil rate band that can be utilised when B dies?

Have I read this situation correctly? If so, can the bank or C be compelled to confirm who the holder is and the account balance at A's date of death?

Sorry, I've only just seen this thread.

If A has a joint account with C, and A then dies, the whole balance in the account automatically becomes C's, (irrespective of any wills). The bank or whatever organisation should only require sight of a copy of A's death certificate to amend the title of the account into C's sole name. I used to work for a bank and confirm that is so.

Yes sure, but that isn't the issue. The problem is that if some of the money in the account belonged to A, then this must be reported and taken into consideration for IHT. If C will not cooperate, what should an executor do?

Legally the funds would have been considered to be jointly held, and upon death of either one, they revert to the survivor, whether that was the intention or not. For that same reason the funds would not need to be disclosed to the estate, because they became C's funds upon death of A. (not even 50% of them). That is why people often operate joint accounts. It makes life simpler when one dies.

(If there was some agreement between A and C, it would down to whether C would cooperate and play ball. There would be no legal obligation for them to do so.)

As C is now the legal owner, he or she would be entitled to confidentiality. It would be up to him or her to notify the bank.

[swill453]

So for the purpose of probate or any distributions by the Executor, the balance of that joint account should not be taken into account and should be totally ignored.

That contradicts the link to The Gazette provided earlier https://www.thegazette.co.uk/wills-and- ... ent/103479

Scott.

[richfool]

So for the purpose of probate or any distributions by the Executor, the balance of that joint account should not be taken into account and should be totally ignored.

That contradicts the link to The Gazette provided earlier https://www.thegazette.co.uk/wills-and- ... ent/103479

Scott.

No, it doesn't contradict the Gazette. Try reading it.

In the UK, bank and building society accounts are generally held by the joint account holders as ‘joint tenants’, so that on the death of one account holder the funds in the account pass to the surviving account holder by the principle of survivorship.

This happens automatically, regardless of the terms of the deceased person’s will or the rules of intestacy and there is usually no need to obtain a grant of probate in order to transfer the funds. The surviving account holder can simply provide the bank or building society with the deceased joint account holder’s death certificate and the account will be transferred into the survivor’s name.

The only and rare exception would be

"if the account holders have agreed otherwise. For example, they may have signed a declaration of trust stating that the account is held by them as ‘tenants in common’, rather than joint tenants, so that on the death of one of the account holders his or her share (as defined in the declaration of trust) passes under the terms of his or her will or intestacy, rather than to the other account holder."

.
It would be highly unusual for such a trust to have been set up and the bank would be unlikely to have agreed to open an account on that basis.

[swill453]

No, it doesn't contradict the Gazette. Try reading it.

The OP's question isn't about who owns the money, it's about liability to inheritance tax. The article describes some potential implications for inheritance tax, and not in relation to the "rare exception" you noted.

Scott.

[hiriskpaul]

IHT cannot be avoided by holding a joint account.

[DrFfybes]

IHT cannot be avoided by holding a joint account.

This was our interpretation. Often joint accounts are for spouses, so the IHT issue doesn't arise.

However take an extreme hypothetical example. If Honor Blackman had opened a joint account with me and put a million quid in it a week before she died, I couldn't see HMRC ignoring that when calculating her IHT.

Paul

[gryffron]

Reading on, the Gazette link goes on to say...

Inheritance tax due on death which is attributable to the funds in a joint account is payable by the surviving account holder who has inherited funds by survivorship (rather than necessarily from the deceased’s estate), unless there is wording to the contrary in any will made by the deceased.

Which actually solves the problem. It IS taxable. But any liability to IHT due on the joint account is C's liability, not the executors. Which does mean the executors can ignore it.
Although if the estate exceeds, or is close to, the nil rate band they might like to tipoff HMRC that they should be pursuing the troublemaker C.
Problem solved. Hurrah!

Answers DrFfybes example too

Gryff

[PinkDalek]

Reading on, the Gazette link goes on to say...

Inheritance tax due on death which is attributable to the funds in a joint account is payable by the surviving account holder who has inherited funds by survivorship (rather than necessarily from the deceased’s estate), unless there is wording to the contrary in any will made by the deceased.

Which actually solves the problem. It IS taxable. But any liability to IHT due on the joint account is C's liability, not the executors. Which does mean the executors can ignore it. ...

No it doesn't solve the problem of what, if anything, should be put on the IHT404, as per my post linked below, and nor can the Executors ignore it:

viewtopic.php?p=299318#p299318

See, for instance, the example on page 24 here https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/864520/Guide_to_completing_your_Inheritance_Tax_account__IHT400_notes__-_English.pdf

Example The deceased owned a joint account with 2 other people that was worth £9,000 at the date of death. They had all contributed equally to the money in the account. The value of the deceased’s share would be an exact one third of the whole (that is, £3,000).

I also believe that extract from the short Gazette article is being misunderstood or maybe the word 'survivorship' is confusing.

In our case, solicitor advised, the deceased name was removed by the bank from a joint bank account held 50/50 with another family. Despite this, 50% of the balance at the date of decease was correctly reflected on the IHT404 and our side of the family, the deceased's Estate, dealt with the IHT on that half. At no stage was there any suggestion the other family should pay the IHT.

At a later stage, the beneficiary of our family's half was named as the joint bank account holder in conjunction with the other family's representative.

Plenty to study at Joint property and nominated property: contents https://www.gov.uk/hmrc-internal-manual ... /ihtm15000 and related sections therein.

[Clitheroekid]

Joint accounts and inheritance tax are a legal nightmare, which is why I've kept out of this debate. But one thing is certain - if probate professionals struggle to understand the rules (which most of them do) the large majority of lay people will not understand them. This is well demonstrated by the number of different views from intelligent and fairly knowledgeable lay people on this board.

The consequences of getting it wrong can result in someone losing a great deal of money, but HMRC are not going to advise you, or protect you from errors.

If a professional makes a mistake they're covered by insurance. If a lay executor makes a mistake they aren't, and they could potentially incur personal liability running into many thousands of pounds.

At the risk of being accused of self-interest I would therefore advise any lay executor involved in an estate where there's a joint account and IHT is payable to obtain written professional advice. This applies even more so where the executor is not a beneficiary, or where their inheritance is only small.

[Lootman]

IHT cannot be avoided by holding a joint account.

take an extreme hypothetical example. If Honor Blackman had opened a joint account with me and put a million quid in it a week before she died, I couldn't see HMRC ignoring that when calculating her IHT.

HMRC would not ignore it. The practical issue might be how or whether they they would discover this liability if the Executors did not know about it or, as was being suggested, elected to ignore it?

Another practical problem might be if Ms Blackman opened that joint account with a foreign national, who then withdrew the funds and wired them overseas?

That said the foolproof way for you and Ms. Blackman to get away with this is for her to marry you on her deathbed, if legal.

If a professional makes a mistake they're covered by insurance. If a lay executor makes a mistake they aren't, and they could potentially incur personal liability running into many thousands of pounds.

At the risk of being accused of self-interest I would therefore advise any lay executor involved in an estate where there's a joint account and IHT is payable to obtain written professional advice. This applies even more so where the executor is not a beneficiary, or where their inheritance is only small.

Indeed. I had idly speculated in the past about choosing an Executor who was a foreign resident and therefore outside the jurisdiction of UK law. Such a person could then fulfil their duties with a much lower practical risk of being held personally and financially liable for any errors or omissions.

[hiriskpaul]

Reading on, the Gazette link goes on to say...

Inheritance tax due on death which is attributable to the funds in a joint account is payable by the surviving account holder who has inherited funds by survivorship (rather than necessarily from the deceased’s estate), unless there is wording to the contrary in any will made by the deceased.

Which actually solves the problem. It IS taxable. But any liability to IHT due on the joint account is C's liability, not the executors. Which does mean the executors can ignore it.
Although if the estate exceeds, or is close to, the nil rate band they might like to tipoff HMRC that they should be pursuing the troublemaker C.
Problem solved. Hurrah!

Answers DrFfybes example too

Gryff

As PinkDalek has said, this does not really solve the problem as to what to put on the IHT forms. As just one simple example of a problem, imagine a simple situation where A dies, everything passing to spouse B on death. There are not PETs to complicate things and the whole of A's estate would fit in the nil rate band anyway. No IHT is payable on A's death and A's nil rate band can be used on B's death. But if A has a joint account with C, then potentially some of A's nil rate band will be used up as A's contribution to the joint account passes to C. C will not owe any IHT, because of the whole of A's estate fitted within the NRB anyway, but there is still the problem of knowing how much of A's NRB was used when B dies.

This is roughly the problem my relative is facing. The family are not wealthy and A's estate will easily fit within the NRB, probably. But there is a small chance that A won a million on premium bonds and paid the cheque into the joint account with C. If C will not co-operate, what does the executor include in the IHT 205 with respect to the joint account (and/or gifts)?

I am going to suggest that the executor calmly explains the difficulty to C in a letter/email, states that she is entitled to all the money in the account by survivourship and says he will accept what she says regarding the account and asks her what if anything should be included in the IHT205. Hopefully C will then start being reasonable. Not easy though as C and the executor do not get on.

[hiriskpaul]

Joint accounts and inheritance tax are a legal nightmare, which is why I've kept out of this debate. But one thing is certain - if probate professionals struggle to understand the rules (which most of them do) the large majority of lay people will not understand them. This is well demonstrated by the number of different views from intelligent and fairly knowledgeable lay people on this board.

The consequences of getting it wrong can result in someone losing a great deal of money, but HMRC are not going to advise you, or protect you from errors.

If a professional makes a mistake they're covered by insurance. If a lay executor makes a mistake they aren't, and they could potentially incur personal liability running into many thousands of pounds.

At the risk of being accused of self-interest I would therefore advise any lay executor involved in an estate where there's a joint account and IHT is payable to obtain written professional advice. This applies even more so where the executor is not a beneficiary, or where their inheritance is only small.

I have a joint account with an elderly relative and this is clearly something I need to think about. The money in the account solely belongs to my relative. I just have on-line access, a cheque book I have never used and a debit card. I have these things because my relative does not do computers, so I order stuff online, make payments, set up direct debits, etc. on behalf of my relative. If my relative dies before me, which is likely, I do not want to inherit the money by survivorship. It should go into my relative's estate. If I die first, I absolutely do not want this account to be considered part of my estate.

This must be a very common situation. What is the best way round it? Would a declaration, signed by us both, stating that the money in the account belongs solely to my relative and should be considered part of their estate do?

[pochisoldi]

Joint accounts and inheritance tax are a legal nightmare, which is why I've kept out of this debate. But one thing is certain - if probate professionals struggle to understand the rules (which most of them do) the large majority of lay people will not understand them. This is well demonstrated by the number of different views from intelligent and fairly knowledgeable lay people on this board.

The consequences of getting it wrong can result in someone losing a great deal of money, but HMRC are not going to advise you, or protect you from errors.

If a professional makes a mistake they're covered by insurance. If a lay executor makes a mistake they aren't, and they could potentially incur personal liability running into many thousands of pounds.

At the risk of being accused of self-interest I would therefore advise any lay executor involved in an estate where there's a joint account and IHT is payable to obtain written professional advice. This applies even more so where the executor is not a beneficiary, or where their inheritance is only small.

I have a joint account with an elderly relative and this is clearly something I need to think about. The money in the account solely belongs to my relative. I just have on-line access, a cheque book I have never used and a debit card. I have these things because my relative does not do computers, so I order stuff online, make payments, set up direct debits, etc. on behalf of my relative. If my relative dies before me, which is likely, I do not want to inherit the money by survivorship. It should go into my relative's estate. If I die first, I absolutely do not want this account to be considered part of my estate.

This must be a very common situation. What is the best way round it? Would a declaration, signed by us both, stating that the money in the account belongs solely to my relative and should be considered part of their estate do?

Personally I'd write a letter addressed to "whom it may concern", making it clear that the money belongs 100% to the relative, and that I am just a signatory who uses the account to make purchases on my relatives behalf. I'd print off two copies, and I'd sign it along with my relative. I'd then make sure a copy is filed with my will and my relative's will. (just in case I pop my clogs before the relative does).

[Lootman]

I have a joint account with an elderly relative and this is clearly something I need to think about. The money in the account solely belongs to my relative. I just have on-line access, a cheque book I have never used and a debit card. I have these things because my relative does not do computers, so I order stuff online, make payments, set up direct debits, etc. on behalf of my relative. If my relative dies before me, which is likely, I do not want to inherit the money by survivorship. It should go into my relative's estate. If I die first, I absolutely do not want this account to be considered part of my estate.

This must be a very common situation. What is the best way round it? Would a declaration, signed by us both, stating that the money in the account belongs solely to my relative and should be considered part of their estate do?

Wouldn't something like that be better handled via some form of power of attorney?

[hiriskpaul]

I have a joint account with an elderly relative and this is clearly something I need to think about. The money in the account solely belongs to my relative. I just have on-line access, a cheque book I have never used and a debit card. I have these things because my relative does not do computers, so I order stuff online, make payments, set up direct debits, etc. on behalf of my relative. If my relative dies before me, which is likely, I do not want to inherit the money by survivorship. It should go into my relative's estate. If I die first, I absolutely do not want this account to be considered part of my estate.

This must be a very common situation. What is the best way round it? Would a declaration, signed by us both, stating that the money in the account belongs solely to my relative and should be considered part of their estate do?

Wouldn't something like that be better handled via some form of power of attorney?

Possibly. Something I need to check. The thing is though, my relative is totally capable of making his own financial decisions, just unused to computers and smartphones, with no inclination/ability to use them. I am not sure a POA is appropriate in those circumstances.

[genou]

This must be a very common situation. What is the best way round it? Would a declaration, signed by us both, stating that the money in the account belongs solely to my relative and should be considered part of their estate do?

For completeness, if you are in Scotland, these issues should not arise if you have an adequate paper trail.

In Scotland, when one person opens a bank or
building society account in joint names unless
they specify at the outset that they are actually
making a gift at the time, the addition of a second
name operates only for the bank’s administrative
purposes; it authorises the bank to deal with
someone other than the investor. It also means
that the survivor can operate the account after the
deceased’s death, but it does not give them legal
title to the deceased’s share. It does not mean that
the funds belong to the named individuals jointly


Taken from https://assets.publishing.service.gov.u ... _2006_.pdf .

I had an admin joint account with my mother, and there was no question of the money passing to me by survivorship.

[JohnB]

My housebound mother has never used a computer but is financially capable. I have a POA but won't exercise it yet, I just know all her PINs and run all her online accounts. I guess sharing the PINs and passwords is strictly against bank rules, but they all seem happy to work on that basis, dealing with me over the telephone provided I put her on to quaver down the phone "yes, my son deals with all my affairs".

I won't have joint accounts with her though, to keep our finances separate, and we keep a scrawled record of all household things I buy for her. For IHT reasons its important we spend her money before mine!

[Chrysalis]

I have a joint account with an elderly relative and this is clearly something I need to think about. The money in the account solely belongs to my relative. I just have on-line access, a cheque book I have never used and a debit card. I have these things because my relative does not do computers, so I order stuff online, make payments, set up direct debits, etc. on behalf of my relative. If my relative dies before me, which is likely, I do not want to inherit the money by survivorship. It should go into my relative's estate. If I die first, I absolutely do not want this account to be considered part of my estate.

This must be a very common situation. What is the best way round it? Would a declaration, signed by us both, stating that the money in the account belongs solely to my relative and should be considered part of their estate do?

Wouldn't something like that be better handled via some form of power of attorney?

Possibly. Something I need to check. The thing is though, my relative is totally capable of making his own financial decisions, just unused to computers and smartphones, with no inclination/ability to use them. I am not sure a POA is appropriate in those circumstances.

You can use a POA for financial and property affairs even if the donor is still capable.
Or, the bank may allow you to operate the account via a third party mandate or ordinary power of attorney. Unlike an LPA this would become invalid if the relative lost capacity.
Or, you could do what JohnB does.
It seems to me that holding a joint account complicates things, especially if you don’t want the money after death (doesn’t it become yours automatically?)

[hiriskpaul]

Wouldn't something like that be better handled via some form of power of attorney?

Possibly. Something I need to check. The thing is though, my relative is totally capable of making his own financial decisions, just unused to computers and smartphones, with no inclination/ability to use them. I am not sure a POA is appropriate in those circumstances.

You can use a POA for financial and property affairs even if the donor is still capable.
Or, the bank may allow you to operate the account via a third party mandate or ordinary power of attorney. Unlike an LPA this would become invalid if the relative lost capacity.
Or, you could do what JohnB does.
It seems to me that holding a joint account complicates things, especially if you don’t want the money after death (doesn’t it become yours automatically?)

But if I have a POA just for financial matters, does that stop my relative from using the same account, to make payments in shops and withdraw cash?

Having an LPA (Property and financial affairs attorney) does not seem to fit our requirements as I am not making financial decisions on behalf of my relative, just carrying out his requests.

[uspaul666]

Reading on, the Gazette link goes on to say...

Inheritance tax due on death which is attributable to the funds in a joint account is payable by the surviving account holder who has inherited funds by survivorship (rather than necessarily from the deceased’s estate), unless there is wording to the contrary in any will made by the deceased.

Which actually solves the problem. It IS taxable. But any liability to IHT due on the joint account is C's liability, not the executors. Which does mean the executors can ignore it.
Although if the estate exceeds, or is close to, the nil rate band they might like to tipoff HMRC that they should be pursuing the troublemaker C.
Problem solved. Hurrah!

Answers DrFfybes example too

Gryff

As PinkDalek has said, this does not really solve the problem as to what to put on the IHT forms. As just one simple example of a problem, imagine a simple situation where A dies, everything passing to spouse B on death. There are not PETs to complicate things and the whole of A's estate would fit in the nil rate band anyway. No IHT is payable on A's death and A's nil rate band can be used on B's death. But if A has a joint account with C, then potentially some of A's nil rate band will be used up as A's contribution to the joint account passes to C. C will not owe any IHT, because of the whole of A's estate fitted within the NRB anyway, but there is still the problem of knowing how much of A's NRB was used when B dies.

This is roughly the problem my relative is facing. The family are not wealthy and A's estate will easily fit within the NRB, probably. But there is a small chance that A won a million on premium bonds and paid the cheque into the joint account with C. If C will not co-operate, what does the executor include in the IHT 205 with respect to the joint account (and/or gifts)?

I am going to suggest that the executor calmly explains the difficulty to C in a letter/email, states that she is entitled to all the money in the account by survivourship and says he will accept what she says regarding the account and asks her what if anything should be included in the IHT205. Hopefully C will then start being reasonable. Not easy though as C and the executor do not get on.

All the financial institutions that my mother and father had joint accounts with provided a balance for the joint account upon seeing a death certificate. That provided all the information I needed to calculate a IHT liability.