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All too often an elderly parent is persuaded by a kind-hearted son or daughter to avoid the “unnecessary” cost of a Lasting Power of Attorney (LPA) and is instead convinced to opt for the cheap and convenient placement of their monies into a joint bank account with the child.
Major problems can arise on the death of the parent in determining the extent of the deceased’s interest in the account (or the child’s intended “lack of interest”) and the uncertainty as to the correct inheritance tax (IHT) treatment of the whole situation.
In Re Northall (deceased) [2010], the deceased, Mrs Northall had purchased her council house with the aid of one of her six sons. The property was later sold. However, the deceased did not have a bank account and so, one of her other sons, Christopher, opened a Joint account with his mother and deposited the sale proceeds of £54,836.00. In the following 3 weeks before her death, Christopher withdrew £28,625 and the day after his mother’s death, transferred the remaining balance into a joint account held with his wife.
Christopher claimed the account had been put into Joint names so he could make withdrawals on behalf of his frail mother. But he further alleged that his mother had instructed him to withdraw money for his own benefit and that any residue within the account upon her death would belong solely to him.
A number of legal principles apply:
When one person alone puts money into joint names, there is a presumption of Resulting Trust in favour of the provider of the funds. This presumption can be rebutted if Christopher could show the circumstances give rise to another technical issue of Advancement (not applicable in this case and to be discussed in a separate Blog) or he establishes evidence that his mother intended to transfer the beneficial interest in the fund – The burden of proof would rest with Christopher in this latter position.
Incidents such as these are all too common. Often however, the family disruption of one sibling suing another, or the existence of more modest balances within the account (i.e. not £55,000), for practical reasons, results in families not pursuing legitimate legal avenues of redress.
The sensible approach is to ensure your financial affairs are protected by a Lasting Power of Attorney (LPA), rather than placing a child’s name upon your account. If, however, you do choose to add their name, you should document the terms upon which they hold the funds and your intention as to its eventual “direction” upon death.
Joint accounts and probate can become entangled when intentions are not made clear. Such formality may feel excessive, but in practice it helps avoid significant joint account probate disputes and misinterpretations.
Joint accounts may not therefore necessarily prove to be the answer to all of your problems – they may just be the start.
To understand more about how to use a Lasting Power of Attorney correctly or to create a Lasting Power of Attorney that meets your needs, visit gov.uk/use-lpa.
Gregory Abrams Davidson Solicitors provides expert advice on Lasting Power of Attorney UK, probate disputes, and estate planning across our offices in Liverpool, London, and West Kirby. Whether you’re searching “probate solicitor near me”, need help with using a Lasting Power of Attorney, or want to avoid the pitfalls of joint accounts, our trusted probate solicitors are here to help.
For advice on how to set up or use an LPA, or understanding lasting power of attorney cost, or to speak to our Lasting Power of Attorney solicitors, contact your local GAD office today. Call 0151 733 3353 (Liverpool) or 0208 209 0166 (London), or visit www.gadlegal.co.uk to get started.
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