I have a joint term deposit with my wife with one of the main banks. We also have a will leaving all of our assets to each other in the first instance.
In the event of my death during the term of the deposit, does this deposit account become the sole property of the other joint account holder immediately (or on production of a death cert?), or is the account frozen pending probate.
And when probate is taken out, is 50 per cent of the amount in the deposit account attributed to my assets on death and to be distributed as per my will – or is it left out of my assets completely, as it has now become the sole property of the other joint deposit account holder?
I have raised the issue both at my local bank branch and also at central customer services with one of the main banks and was left with the impression that the staff might have been unsure.
READ MORE
Also, as a variation for information, in the event of me having a joint term deposit account with (say) my son, how would this work if I die during the term?
Would the amount on deposit become the sole property of my son etc and what would his access level be, or would this depend on the probate process and the contents of my will?
In the event of the whole amount on deposit becoming the property of my son, either immediately or after delays for other processes, how would this impact on the inheritance tax exemption of €400,000 for children.
I’m hoping that you’ll be able to clarify what seemed to me like a simple question initially, or have I inadvertently stumbled on a possible loophole in the inheritance tax exemptions? − MB
Joint accounts are a feature of the majority of households in Ireland, yet few people actually stop to think about the implications of pooling financial resources or what might be involved in unravelling affairs if and when one of the joint account signatories die.
I don’t know if it is the norm any more but certainly when we were taking out the mortgage on our home, the lender – one of the main Irish banks – insisted that we open a joint current account and that the mortgage be repaid from that account.
And then there are situations like yours, where a couple decides to put their savings in joint names.
And then you have a situation, which is becoming increasingly common, where a parent adds the name of a family member to their accounts as they get older so that their financial affairs can be managed if they themselves are too frail to monitor things themselves.
Such accounts can, of course, be useful. Unless they are set up with specific conditions, any of the account holders can access funds.
But whose is the money and what happens when you die?
That depends on two things – which of two types of joint account it is and who paid the money into it.
Accounts can be held either under joint tenancy or tenancy in common. They sound the same but they are very different.
Joint tenants – whether of a bank account, a property or other asset – share full ownership of the asset; that is to say each of them is a 100 per cent owner. Tenants in common, however, each hold a specific share of the assets.
That could be 50 per cent each among two tenants in common but it could also be, say, 70/30. It does not have to be equal shares.
In this latter form of account, the account will definitely be frozen on the death of either account holder and the share of the account belonging to the dead account holder will be managed under the terms of their will.
In a joint tenancy, however, the entire assets of the account generally pass to the surviving account holder(s) under what is called “right of survivorship”. The key thing here is that the account remains accessibly to the remaining account holder after the other’s death.
Once a certified death certificate is produced to the bank, they will amend the names on the account to those of the surviving account holder(s), reissue any associated cards etc.
It is important to note that in cases where a family member has been added to an account for practical purposes, a bank will work on the basis that the assets in the account belong to the deceased and will freeze the account on notification of death.
But what about inheritance tax?
Well, it is not an issue with your wife as anything she inherits from you or vice versa – through right of survivorship or via a will – is exempt from tax.
However, in the notional case of a joint account you might hold with your son, things are slightly different.
I’ve come across this before and banks (and Revenue) will want to know how much of the assets have been contributed by each named signatory. In the absence of that information – or their being satisfied by it – the account is likely to be frozen.
Anything your son is deemed to inherit from the account – as in money that he did not put into it – will be set against his €400,000 tax free exemption, regardless of any joint account status. Survivorship simply means that something passes directly to another party and does not form part of your estate – and therefore is not treated under provision of any will.
If you are opening such an account it would be worthwhile noting in writing to the bank on the application for the account that it is held as a joint account with right of survivorship. That indicates the intention that the assets are held equally by and for both parties.
Make sure you keep a copy of any such instruction for when the query inevitably arises because, like you, I increasingly find that front-line staff in banks are really only familiar with the most common elements of their operations. Anything arcane – such as the inheritance position on joint accounts – would not be something they will generally be familiar with.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to [email protected] with a contact phone number. This column is a reader service and is not intended to replace professional advice.
