I’ve started a new thread from a point raised in an earlier thread about severances. Many years ago, at an old firm, we used to prepare severances for joint bank accounts. Over time I have stopped doing so as I believe it creates more problems than it solves with advice being given to clients to avoid holding large balances in joint accounts unless they actually want the account to pass by survivorship. I would be interested to hear how other practitioners deal with this.
As an extension to Haroon’s question, I would be interested to know if those advising on the severance of joint bank accounts limit such advice to those accounts held between spouses/civil partners who are both domiciled within the UK, or if such advice might be given to any joint account holders.
Where spouses/civil partners (both of whom are domiciled within the UK) are the account holders I believe their estate’s entitlement on death, or as at the date upon which the joint account is otherwise terminated, will be half of the balance then on the account (with no regard to the intervening transactions). If (only) one of them is not domiciled within the UK, I believe the transactions will need to be tracked in the light of s.18(2) IHTA 1984.
I have seen a number of instances where the joint account holders are parent/child, siblings, or cohabitees, and it seems to me that in such instances every transaction needs to be allocated to one of the parties to identify the individual entitlements to the remaining balance. With parent/child accounts, whilst the presumption of advancement might be applied, it does not make the identification process any easier.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
My experience is that jointly held bank accounts from a tax/legal perspective are more trouble than they are worth. This is particularly so where the joint account is held outside the UK, both holders are UK resident, but with one holder claiming remittance basis treatment. The accounting required to track who paid what in when and who extracted what and when is a complete nightmare.
Having said this, for a “typical/normal” married couple a joint account has many practical advantages including passing without the need for probate on death and I see no real reason to sever such an account without good reason.
For the non-marrieds passing by survivorship may well be a problem and a joint account should be avoided if at all possible.
The concept of the bank account held as tenants in common is more pie in the sky than a reality.
Malcolm Finney
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