What happens to a joint bank account when someone dies?

Jennifer Russell of Wright Hassall explains what happens to a jointly-held bank account in the UK when one of the account holders dies.

What Happens to a Joint Account When Someone Dies

Does the joint owner of a bank account automatically receive the funds when the other owner dies?

In the UK, bank and building society accounts are generally held by the joint account holders as ‘joint tenants’, so that on the death of one account holder the funds in the account pass to the surviving account holder by the principle of survivorship.

This happens automatically, regardless of the terms of the deceased person’s will or the rules of intestacy and there is usually no need to obtain a grant of probate in order to transfer the funds. The surviving account holder can simply provide the bank or building society with the deceased joint account holder’s death certificate and the account will be transferred into the survivor’s name.

However, this may not necessarily be the case if the account holders have agreed otherwise. For example, they may have signed a declaration of trust stating that the account is held by them as ‘tenants in common’, rather than joint tenants, so that on the death of one of the account holders his or her share (as defined in the declaration of trust) passes under the terms of his or her will or intestacy, rather than to the other account holder.

Are there inheritance tax implications when a joint bank account holder dies?

HMRC asks detailed questions about joint accounts on the inheritance tax return, which is submitted as part of the application for probate or letters of administration when someone dies.

Whilst HMRC may not be too concerned about the ownership of joint accounts held by spouses or civil partners (as such transfers would be exempt from inheritance tax), they will look more closely at accounts held by others, such as unmarried couples and parents and children.

Rather than simply assuming each account holder is entitled to an equal share of the funds, HMRC usually treats account holders as owning a share of the funds which is proportionate to their contributions to the account. For example, if one account holder provided all the funds, the whole balance of the account will be treated as belonging to him or her on death, and potentially subject to inheritance tax.

Withdrawals from the account will usually be set against that person’s own contributions as far as possible.  Withdrawals which exceed a person’s own contributions may be treated as a lifetime gift from the other account holder, which could have inheritance tax consequences.

Inheritance tax due on death which is attributable to the funds in a joint account is payable by the surviving account holder who has inherited funds by survivorship (rather than necessarily from the deceased’s estate), unless there is wording to the contrary in any will made by the deceased.

Are there income tax implications when a joint bank account holder dies?

From an income tax perspective, for joint accounts passing automatically to the new owner by survivorship, income arising after death belongs to the surviving account holder. For accounts held as tenants in common, income attributable to the deceased’s share will pass to his or her estate and be subject to tax in it. The usual rules on taxation of estate income on beneficiaries on any distribution of capital to them would then apply.

What happens to a joint account after death?

In conclusion, although joint accounts may seem straightforward whilst the account holders are alive, issues can arise when one account holder dies which may make the situation more complex than first thought, and so account holders should look to clarify the position whilst they are alive wherever possible.

About the author

Jennifer Russell is an Associate Solicitor in the wills, trusts and tax team at Wright Hassall LLP. She advises on estate planning, including the use of wills and trusts.

See also

What happens to my pension after death?

Where should I store my will?

Everything you need to know about fixing mistakes in wills

Image: Getty Images

Publication date: 21 January 2020