Joint bank accounts are a popular option amongst couples and other groups of people who have a shared responsibility for paying bills, such as housemates. They can also be useful when someone is assisting an elderly relative in managing his or her finances.
A joint bank account has two or more people named as holders. Depending on the terms and conditions of the account, each person named on the account is usually able to pay money in and take money out.
These types of accounts undoubtedly offer some advantages, such as providing a straightforward way of sharing money and meeting expenses, however there are also several potential issues of which it is important to be aware.
First of all, unless controls are set up in advance to prevent it, one account holder could decide to withdraw all the money from the account without the knowledge or consent of the other holders, who will have limited options for getting their money back.
In addition, each account holder is jointly and severally liable for any debt on the account, which means that the bank could pursue any of the named holders for full payment of a debt.
This can come as a surprise to many joint account holders. In fact, research conducted by M&S Bank and website savvywoman.co.uk found that over 71% of joint account holders questioned were not aware of this liability. The same situation arises if a couple with a joint account split up – they can both be pursued for full payment of any debt, not just half.
A further area of complication can occur if one of the account holders dies. When this happens, the bank will normally transfer the account into the name of the surviving account holder(s) even if that does not reflect the terms of the deceased’s Will.The deceased’s share of the account balance will still count as part of his or her estate and will need to be taken into account when calculating any inheritance tax liability. In this regard, it is important to be aware that there are very different rules in Scots and English Law regarding who owns the funds in a joint bank account.
Murray Beith Murray is one of Scotland’s leading private client law firms. For over 160 years we have specialised in meeting the legal, financial and administrative needs of individuals and families, family trusts, charities and private companies. Contact us today to find out more about how we can help you.