What constitutes a bank account? Will interpretation

Trusts Discussion
1

Hi

I am dealing with the estate whereby the will contains a specific gift as follows:

‘I give to my son all monies standing to the credit in all of my bank and building society accounts…’

The Estate consists of the following:

Legal & General Open Ended Investment account

Natwest investment portfolio

Santander, Vanquis, Saga accounts

My question is do you consider that the Legal & General & Natwest investment portfolio fall into the definition of bank or building society account? The Natwest is a considerable sum & the residue passes to other people.

Thanks

Lyndsey McHale
McHale Baker

2

My view would be that the investment portfolios do not fall within the definition of bank and building society accounts.

Joyce Bennell
RLK Solicitors

3

In my opinion an investment portfolio is made up of shares, unit trusts, investment trusts and suchlike, and is NOT a bank account

Julian Cohen

Simons Rodkin

4

I recall having a similar issue some years ago.

On the basis that a bank account consists of cash, the Nat West investment account, whilst held with a bank, is not a “bank account”.

The Legal & General account might also be outside of the definition.

Similarly, I recall a cash ISA is not a “bank account”.

As regards the other accounts, it may depend on what they really are. If cheque/current accounts, I would expect them to be within the definition, as I anticipate would be a deposit or regular savings account. However, if any are bonds, or other similar forms of investment, I feel they would be outside of the definition.

Mindful that some are of significant value, I suggest it would be appropriate to seek advice of Chancery counsel, who should also be supplied with a copy of the will instructions, if still available.

Paul Saunders

5

Hi Lyndsey

IHT406 bank accounts definition (these would fall under the Banking Act) only. Investments are under the Finance Act. Unit trusts etc. If a bank offers investments they’ll indicate its regulation.

It ought to be noted non-regulated products NS&I and premium bonds - which are ‘gilts’ fall under bank accounts even if called an investment.

Richard Bishop
PFEP

6

This should be an example of why it is dangerous to include a bequest of this type in a Will. Better to give a legacy or share of residue. As we know monies, such as the proceeds of sale of a property which the testator was intending to use to buy a replacement property (not given to the beneficiary) could be caught by the gift.

Patrick Moroney
BWL solicitors

7

It sounds like it would be sensible to check the correspondence and attendance notes relating to the matter and/or speak to the person who drew up the Will, to see if that sheds any light on what was intended.

Having said that, the reference to “monies standing to the credit” suggests to me that the draftsman had in mind the sort of “account” where a person could make cash withdrawals and potentially go overdrawn, which lends weight to the idea that the legacy refers only to cash bank accounts, not investment accounts. Admittedly, one could encash part of a portfolio and make a withdrawal from a capital cash account.

In simple terms, what I usually think of as a “bank account” is a type of “loan account”: the customer lends money to the bank; the bank keeps a record (or “account”) of the sums lent and the sums repaid to the customer.

However, it could be that draftsman is referring to any “account” (or “record”) with any bank or building society, regardless of whether that is of the simple “loan account” arrangement, or whether that is something more sophisticated, such as a portfolio of investments (which, itself, will normally have its own “account number” and be associated with one or more “cash accounts”).

Paul Saunders’ comment about a cash ISA not being a “bank account” is not one I have heard before. If correct, it makes the position even less clear to me. I wonder if anyone has a reference for this point?

On the other hand, I would not naturally have considered Premium Bonds to be a “bank account”, although I consider them to be “cash-type” investments. On reflection, Premium Bonds involve the customer “lending” money to the government in return for entry into the prize draw and with the option at any time to take repayments of the money lent, with no risk to the value of the amount lent (which cannot go up or down, other than by further lending/repayments). This does sounds like a bank account to me.

The moral of the story seems to be that one should be careful about definitions in Wills if there is any risk of ambiguity! In this case, I would look again at the attendance notes and correspondence.

Paul Davidoff
New Quadrant Partners Ltd

8

An ISA is not an asset in itself. The asset owned is the underlying asset. If that is a deposit with a bank or building society account then what is owned is a bank or building society account.

Jon Zigmond