Do funds in a joint account pass automatically to the survivor?

02 / 02 / 2017

Jessica Cousins, Solicitor in the Private Client team answers a readers question in Choice Magazine published on 1 February 2017.

Q. My wife and I are both in our 80s and we have our house registered as tenants in common. For many years we have also held a three-way building society account in the names of me, my wife and our son, which we have contributed to, and any one of us can sign to make withdrawals.

My question is: if my wife and I should die, either together or separately, what would have to be declared for probate? Would the funds in the account automatically belong to the survivor, or survivors, or could the funds be withdrawn before probate? Our estate will not be liable to Inheritance Tax.

A. If the building society account is held in the joint names of you, your wife and your son, you will hold it as joint tenants unless you have completed a declaration of trust to the contrary. However, it would be worth checking this with the building society;
it is likely to have been part of the paperwork you signed on setting up the account.

Assuming the account is held as joint tenants, on the death of one of you, it will pass automatically to the two survivors. A grant of probate will not be needed for the account and the survivors can continue to use it as before.

Having this form of joint account is a good way of ensuring a surviving spouse or other joint owner can have immediate access to funds. You say that you have all contributed to the building society account and that your and your wife’s estate will not
be subject to Inheritance Tax (IHT). However, in the case of an estate where IHT is an issue, care should be exercised with the valuation of joint accounts if contributions to it have been unequal or largely stemmed from one person.

There is a risk that on the main contributor’s death, the whole of the account will be treated as theirs for IHT purposes (and
potentially subject to IHT at 40 per cent) even though it passes to the surviving joint owners. If this situation were relevant,
advice should be taken on making a declaration of trust to make clear that the account beneficially belongs to the joint owners equally (or in whatever proportions is agreed).