Published on: 31st October 2016

Joint accounts practical or not?

Joint accounts are a low cost and practical way of paying an elderly relative's bills if they are struggling to manage their finances. They are much quicker to set up than registering a Lasting Power of Attorney. Also, they do not always cease on death, meaning that ongoing bills can be paid without substantial delay.

Families often think joint bank accounts are the way to go, but there are some serious problems that arise frequently. These include who owns the money in the account, how that money will be taxed for when it comes to inheritance tax, and how banks treat joint accounts on death. Some banks will freeze joint accounts when one of the account holders loses capacity, resulting in bills being unpaid and a lot of effort going into unfreezing them.

In most accounts, it is presumed that the accounts were only set up for administrative reasons and belonged entirely to whoever paid the money in. This uncertainty and complexity has led to many court cases between family members and HMRC also, who will want to tax the money on the paying party's death.

Another frequent problem is that if the accounts have been set up by elderly relatives, there can be a question of whether that person had capacity or was possibly influenced to set up the account.

Therefore, it is advisable to be clear on what is intended and to record this. A Lasting Power of Attorney document can assist once the elderly relative finds it difficult to manage the account or starts to lose capacity.

Taking advice from experts such as us avoids future expense, disputes, uncertainty and possibly tax bills. Contact us for free, no-obligation advice.

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