It is quite common for the elderly and incapacitated to add a third party to their bank accounts so that someone can help them with their finances. They may appoint one of their adult children, because that person happens to live locally and visits often. They may appoint a friend, neighbour or carer.
They believe that they are simply adding a name to their account but the reality is that they are changing their sole account to a joint account. What they may not realise is that on death any money held in a joint account passes automatically to the joint owner whether you intended this to happen or not.
Legal impacts of adding someone to your bank account – case study
In the recent case of Whitlock v Moree, an elderly man in his mid-nineties added his friend’s name to his bank account so that his friend could help him pay his bills. He completed various bank forms and in a section asking about the purpose of the account, he wrote: “to pay utility bills”. When he died, there was $190,000 in the account. All the money passed automatically to his friend as joint owner.
The executors of his estate applied to the court to decide whether the money in the account should in fact form part of his estate and pass to the beneficiaries named in his Will. The court decided that the money passes automatically to the joint owner.
Although it has always been the case in law that joint property passes to the survivor, the courts have in the past looked at the parties’ intentions. There was an assumption that the newly added party held the money on trust for the original owner unless there was evidence to show that the original owner wanted to make a gift of the money. It will be much harder for the courts to consider the parties’ intentions in the light of this case.
The best way for the elderly to get help with their finances is to set up a Power of Attorney appointing someone they trust to help when needed. The Attorney can then put in place permissions with the bank to give the trusted individual access to the bank account in question.
You must implicitly trust the other person
It’s surprisingly common to find that elderly clients have set up informal arrangements such as adding a son or daughter to their accounts. As probate lawyers, we often come across cases where one son or daughter inherits a joint account and ends up with more money than their parent intended. The consequences are even more serious if the money passes to someone who was never intended to inherit such as a friend or carer.
For many people, joint bank accounts seem like an easy solution to allow another person to pay their bills. However, care should be used in considering such an arrangement, especially when there are safer options.
At Hodge Jones & Allen, we can assist with all aspects of life planning including setting up Lasting Powers of Attorney. It can be easier than you think and makes sure your wishes are protected. To speak with one of our specialist solicitors on 0808 252 5231or request one of the team to call you back.