Accounts are often opened in joint names without considering all the implications.
An elderly parent sometimes decides to add one of their children onto their bank account to make it easier to run their financial affairs instead of going through the process of having a power of attorney or a third party mandate.
In most cases this does not cause any problems. The child uses the money to pay mum or dad's bills and when they die the remaining funds are divided between all of the older persons children and included in the total estate for tax purposes.
But, this is not always the case. By transferring the account to joint names the child can take money out of the account and spend it themselves. When the older person dies they may decide it is now their money and not split the sum with their siblings. If there is Inheritance Tax payable on the estate they may be tempted not to declare the account and pay tax on it - and when the Inland Revenue discover it (as they will do) penalties will be payable.
There have been a number of cases that have ended up in court - at great expense. Where the siblings decide not to take any action it can lead to a lifelong split in the family, with one sibling rightly feeling aggrieved at the actions of their brother or sister.
Going through the process of creating Lasting Powers of Attorney may seem an expensive and cumbersome process, but it is the best option.
For more information on Lasting Powers of Attorney, please contact our Wills and Probate department on 01905 721600.