Joint Account Tax on Death

[QueefofSheena]

Does anyone know the answer to this please? I’m getting conflicting information on this from googling: If you have a joint account with someone who put the bulk of the money in, and they die, does it count towards their estate or does it transfer to the other account holder entirely? If so, is tax payable as a gift if 7 years haven’t passed? This has the potential to be a thorny family issue, and the other person is likely to just piss it away without thinking of any potential tax liability. Thanks.

What country are you in (if UK, specifically which nation?)

Thanks for replying, we are in England.

My husbands joint account with me became mine on his death. Not sure about if it counts to the estate as we didn't need probate / IHT

I looked this up. Seems like joint accounts between spouses or civil partners pass completely to the survivor in the event of the death of one partner. Joint accounts between others it's more complicated as regards inheritance tax and beneficiaries of wills.

Thanks for the replies, that’s what I suspected. It’s not a spouse situation, but two family members. The elderly one has set up a joint account with a younger person, I think possibly to get round the gift element. The younger one doesn’t have access as there aren’t any cards issued. The older one likes to try and control people with money. I have LPA and they now have dementia, so I’m trying to spreadsheet and unpick their financial position which is complicated to say the least. They are also very unwell with other conditions.

I don’t want anyone to be left with a tax headache they weren’t expecting and don’t really understand. The executor can hopefully sort it out when the time comes, which should be easier if I have everything documented properly. Families!

With no spouse status and no access, it's only a joint account in name.

There is no tax on gifts. But this money has not been gifted anyway as person two has no access to it.

The "tax on gifts" is always misunderstood. Gifts over the tax free "allowances" are added back into the estate for inheritance tax purposes, on a sliding scale up to seven years pre death.
This is obviously only an issue if inheritance tax is payable anyway. But the estate pays the inheritance tax, not the recipient of the gift (unless there isn't enough money in the estate, then it reverts to the receiver).

But gifts must be given "without reservation" otherwise they are not gifts. This person two has received nothing. I would simply remove them from the joint account, or (because banks can be a pain about that), open a new sole account and move all the money there. As the attorney your legal obligation is to act in the best interests of person one. Person two has no look in. And what might happen after death isn't relevant at all.

There's surely no risk of person two frittering the money if they have no access to the account anyway.

There’s only no access as person one ‘doesn’t believe’ in debit cards. I suppose there’s nothing to stop person two presenting himself in person to the bank with ID. Person one definitely wants person two to have a fixed amount from the account, but there 50% more in it than that amount. Some of person one’s bills are also paid from it.

I didn’t realise about tax on gifts only being payable over the inheritance tax threshold. It makes sense now I think about it though. It’s one of those things I’ve always believed based on no hard facts whosoever! Thanks, lots to think about.

There's also a thing about regular gifts, paid from income and not affecting your lifestyle, not being subject to inheritance tax. Don't know if that might apply to person 2 one day?

And there question of disposing of assets if it can be seen that care is needed (dementia).

It's all a bit of a minefield.

@Mosaic123

There's also a thing about regular gifts, paid from income and not affecting your lifestyle, not being subject to inheritance tax. Don't know if that might apply to person 2 one day?

And there question of disposing of assets if it can be seen that care is needed (dementia).

It's all a bit of a minefield.

Yes, regular gifts from income that do not diminish your lifestyle are tax free too. My mum gifts £250pm to each of her three grandchildren for this reason. But they do have to be regular, they do have to be from income (and income has a definition) or at very least intended to be regular though there is no definition of regular.

Re deprivation of assets regarding care home fees - this can only apply if care was reasonably likely. Not everyone goes into care (and runs out of money). If I gave away all my money now, aged 53 and with no hint of needing care, but needed care in ten years, I did not deprive myself of assets to avoid care fees.

No but if you have two carers a day and give away half your capital this may not be viewed well.

@Mosaic123

No but if you have two carers a day and give away half your capital this may not be viewed well.

Possibly - depending what "half your capital" amounted to I guess. Why, who does that apply to?