Legal rights and Joint Accounts in Scotland

RobotKing

In Scotland, if one party to a joint account dies does the whole of the joint account balance automatically pass to the other party to the joint account or is some portion of that balance regarded as being the deceased's net movable assets under the legal rights provisions of Scottish law?

xylophone

https://www.citizensadvice.org.uk/scotland/family/death-and-wills/after-death-dealing-with-an-estate/#:~:text=Joint bank accounts&text=Half the balance on the,to belong to that person.

https://personal.rbs.co.uk/personal/life-moments/bereavement.html

RobotKing

Thank you for your reply, xylophone.
I had read the information given in your first link but I'm not sure that it answers the question as it is given under the heading "Step 1 - Valuing the property and possessions". I can appreciate that this method will be used for valuation of the deceased's estate.
Regarding the second link, which reads as follows: What happens if the deceased had a joint account?

If the deceased had a joint account, we’ll transfer it to the name of the other person once we’ve seen the death certificate and completed a review of any joint facilities.
That explains what the bank will do but, again, unfortunately, it does not answer the question about whether any portion of that balance is regarded as being the deceased's net movable assets under the legal rights provisions of Scottish law.
Thanks again.

naedanger

No, the ownership does not pass automatically in Scotland.

In Scotland, when one person opens a bank or building society account in joint names unless they specify at the outset that they are actually making a gift at the time, the addition of a second name operates only for the bank’s administrative purposes; it authorises the bank to deal with someone other than the investor. It also means that the survivor can operate the account after the deceased’s death, but it does not give them legal title to the deceased’s share. It does not mean that the funds belong to the named individuals jointly.

So where the funds in a joint account have been wholly provided by the deceased, we would expect to see the whole funds as part of the estate. But, if the other joint owner had put in all the funds, none of the account would belong to the deceased and would not be included as part of their estate. Where the funds are provided jointly, the current balance reflects the proportionate share of the provider and where withdrawals are made for the benefit of any of the owners, their share is reduced proportionately.

If any withdrawals have been made by or for the benefit of anyone other than the owners, there may have been a gift by the deceased to be taken into account when filling in the C5(2006) or IHT400 later.

If the deceased provided more than an equal share of the funds to purchase any other asset in joint names there may have been a gift which needs to be taken into account for Inheritance Tax.

source:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/821770/C3_2006_.pdf

RobotKing

Thank you for your reply, naedanger. 
I should have mentioned that the joint accounts were opened in England between one and fifteen years ago. Does that have any bearing on the situation?
Many thanks.

naedanger

RobotKing said:

Thank you for your reply, naedanger. 
I should have mentioned that the joint accounts were opened in England between one and fifteen years ago. Does that have any bearing on the situation?
Many thanks.

Sorry, I don't know. I am only going on the wording I have quoted. Does the answer affect who is going to get the money? 

RobotKing

naedanger said:

RobotKing said:

Thank you for your reply, naedanger. 
I should have mentioned that the joint accounts were opened in England between one and fifteen years ago. Does that have any bearing on the situation?
Many thanks.

Sorry, I don't know. I am only going on the wording I have quoted. Does the answer affect who is going to get the money? 

Well, the answer will determine whether or not a desired distribution of the account balance will be legally possible under Scottish law.

naedanger

RobotKing said:

naedanger said:

RobotKing said:

Thank you for your reply, naedanger. 
I should have mentioned that the joint accounts were opened in England between one and fifteen years ago. Does that have any bearing on the situation?
Many thanks.

Sorry, I don't know. I am only going on the wording I have quoted. Does the answer affect who is going to get the money? 

Well, the answer will determine whether or not a desired distribution of the account balance will be legally possible under Scottish law.

OK, sorry I can't help. (I was going to say if the answer affects who is going to get the money then, if I was the executor, I would probably seek legal advice.)

xylophone

I had read the information given in your first link 

Did you see the information specific to joint accounts?

If a joint account was held by spouses or civil partners, and both contributed to it, it is presumed that the money is held by them equally. Half the balance on the date of death is therefore presumed to belong to the person who died. Most banks allow the surviving account holder to have access to funds in the account.

If only one person contributed to the joint account, the balance would be held to belong to that person.

A surviving joint account holder might have to prove that they had paid in all the money in the account, for the account to be excluded from the estate of the other account holder who has died.

If an account is held in joint names of people who weren’t married or in a civil partnership:

• the executor must establish how much of the joint account belonged to the person who died. This doesn't affect the surviving owner's right to withdraw money if a bank mandate allows it. The information is needed so that the estate can be valued for inheritance tax and if the surviving account holder is not the executor there may be problems if the account holder uses a lot of the funds before the estate has been settled and valued
• if there are more than two surviving account holders, the bank will ask them for a new mandate authorising future transactions through the account
• the bank will stop transactions on the joint account if the balance is overdrawn and part of this debt will become a claim on the estate
• the surviving account holder can continue to write cheques and draw on the account, if the account mandate at the bank provides for this. If there is no mandate, the bank will stop transactions on the account and payment will only be able to be made on the authority of the executor, acting along with the surviving account holder

 I should have mentioned that the joint accounts were opened in England between one and fifteen years ago. Does that have any bearing on the situation?

Were they governed by English or Scots Law?
See

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm15054

Under Scots Law, where Bank or Building Society Accounts are held in joint names the special (or survivorship) destination (IHTM15050) does not by itself pass the ownership of the money in the account to the survivor.

An account with a Bank or Building Society is not a document of title as it is not a Deed of Trust in terms of the Bank Bonds and Trusts Act 1696. It is a contract between the Bank and the customer which regulates the conditions on which the account is to be operated and is for administrative convenience only. See for example Cairns v Davidson 1913 SC 1054.

For this reason the ownership of the funds in the account is determined according to the ordinary principles of ownership. The owner of the funds in the account remains the owner unless and until some transfer of ownership occurs.

Example

James and Lucy (who are married) open an account, governed by Scots law, in their joint names and James has provided all the funds. James dies and is survived by his wife, Lucy. On his death:

• In the absence of any act of transfer of ownership to Lucy (for example, a separate Deed of Gift) the whole account should be included in the IHT400.
• If the account passes to (say) the children under the terms of James’ Will then the asset will be chargeable to Inheritance Tax.
• If the account passes to Lucy under the terms of the will (IHTM11032) then exemption under IHTA84/S18 will apply.

This applies to all Bank/Building Society accounts governed by Scots Law. So it will apply to taxpayers living in England, Wales and Northern Ireland who have an account which is governed by Scots Law.

RobotKing

Thanks, xylophone, for the very comprehensive reply. All the joint accounts (and, indeed, the individuals' personal accounts) were opened in England well before they moved to Scotland and they have no assets in Scottish banks or building societies.