Whose Money Is It? The Problem with Joint Bank Accounts
Many couples have joint bank accounts and many parents add their adult children as a named holder to their account for help with paying the bills and accessing cash.
Whilst such arrangements can be very convenient, problems often arise when one party dies, both practically and in determining who the monies truly belong to.
A Case in Point
Mrs Northall was in her late seventies when she sold her council house for around £55,000. Mrs Northall did not have a bank account so she opened an account in joint names with one of her six sons, Christopher, and the £55,000 was paid in.
One month later, two things had happened. First, on Christopher’s instructions, substantial payments had been withdrawn. Secondly, Mrs Northall had died. The day after her death, Christopher arranged for almost the whole balance to be paid into another joint account, which he held with his wife.
Christopher argued that he had made the payments on the basis of the small print contained in the bank’s mandate form at the time the account was opened. This stated that if either party died, the funds would be paid to the other. Christopher argued that the withdrawals he had made during his mother’s lifetime and the transfer of the balance to him on her death were carried out with her blessing.
Unsurprisingly, Mrs Northall’s five other sons argued that Christopher’s actions were wrong, and that their mother had not intended to gift the money to Christopher. The court agreed, despite the terms of the bank mandate form.
How Banks Treat Joint Accounts
There is little uniformity across the banking sector in the way that joint accounts are dealt with following the death of one account holder. Banks do not automatically stop funds being withdrawn from a joint account, and will usually transfer the remaining balance in the account to the surviving account holder on production of a death certificate, without question.
This works well for people who want to ensure their spouse or partner has swift access to funds following their death. However, in cases where there may be a dispute as to who is entitled to the funds in the account, those acting on behalf of the deceased should contact the bank to notify them of the death, but also to request that the account be frozen until such time as the distributions can be agreed.
It is also vital for those acting on behalf of the deceased to raise any concerns with the surviving account holder as soon as possible, and seek their agreement, where practical, for the account to be frozen or closed, as in reality, banks tend to take the view that they should continue to allow the surviving holder access - because they are a named joint account holder.
What You Should Know
Consider your situation carefully before opening a joint account.
Powers of Attorney and Lasting Powers of Attorney provide a way of formally appointing family members or others you trust to help manage your financial affairs and should always be considered as an alternative to adding another person to your bank account, however appealingly simple that may seem at the time.