Joint account with parent

Mary2223

My parent passed away recently. Having lived with me for the last 15 years where I was the sole carer. The will which was made 15 years ago, states for the estate to be split 50/50 with my sibling. Just over half of the estate, under 70k was in a joint account with myself, how do I put this back into the estate (as now it is legally mine according to the bank) as I do not want it to affect my estate for inheritance tax should anything happen to me in the next 7 years.

74jax

Do you claim benefits of any kind that it could be seen as deprivation of asserts?
Did you have PoA and also this account?

Keep_pedalling

This is one of the complications that fall out of using joint accounts to manage some ones money instead of obtaining lasting powers of attorney. When IHT is involved in an estate and there are joint accounts between non spouses, HMRC don’t simply regard the account as a 50/50 split, they want to know how much was contributed by the deceased person.

Assuming your parent put the entire £70k in this account you can document this on IHT 205 Box 9.2, which should provide the required cover should HNRC challenge the executor of your estate.

Mary2223

No benefits claimed and no power of attorney. It was done for ease by my parent as mobility was a problem. I have no problem sharing the money but I do not want my children to have to pay more inheritance tax than necessary as my estate would be over the threshold without that.

xylophone

Your parent provided all the money in the account.
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm15042

 As I understand it, if this was a standard joint bank account, then regardless of the fact that for IHT purposes  the cash in it will be taxed as wholly  within your mother's estate, legally it is outside your mother's estate and cannot be left by will (in the same way a a joint tenancy of a house cannot be left by will). Therefore the money in it falls under your ownership and control and is now part of your own money and estate.

This means that as things stand,  under the will your sibling is entitled only to half of whatever is in the estate.

That is to say, supposing there were £70,000 in the joint account and £70,000 in a sole account, your sibling would be entitled to only £35,000.

You cannot "put money back into the estate".

However, you could vary the will such that your sibling was entitled to the whole estate?

In the circumstances, you describe, this should leave you more or less "even stevens"?

You might consider making a cash gift to your sibling to make things exactly even (perhaps this would use up your gift exemption of last year and this?).

Are you saying that your own assets are currently in excess of the IHT allowance?

 If all your mother's money had been in a sole account, then you would have inherited half and therefore this money would have become part of your assets and estate.

Mary2223

That is the problem, if I did a cash gift to even it up then that would exceed my allowance and would become a problem to my children if I did not survive for 7 years as my own assets currently exceed the IHT allowance before this inheritance. 

Keep_pedalling

Mary2223 said:

That is the problem, if I did a cash gift to even it up then that would exceed my allowance and would become a problem to my children if I did not survive for 7 years as my own assets currently exceed the IHT allowance before this inheritance. 

You could always cover any potential IHT from gifts with a with term life insurance. If you don’t have any current health issues it should be a cheap option.

If you own your own house are you taking you residential nil rate band into account in your IHT calculations?

Mary2223

I think insurance would be quite high due to my own health conditions. I have taken my own house into consideration with the calculations.

naedanger

Mary2223 said:

I think insurance would be quite high due to my own health conditions. I have taken my own house into consideration with the calculations.

Which country did your parent live in England, Wales or Scotland? (The ownership position of joint accounts is different in Scotland from that in England and Wales.)

If your parent lived in Scotland then the money in the joint account (based on your description of that account) would all be part of your parent's estate.

If your parent lived in England or Wales then I would do as xylophone suggests. Just to elaborate slightly: I will assume the estate is £68,000 and the amount in the joint account is £70,000. Both figures being after deduction of all expenses including the cost of preparing a deed of variation. Do a deed of variation so that the full estate of £68,000 goes to your sibling. Then pay £1,000 from the joint account to your sibling and keep the rest. The end result is you both inherit the same £69,000 which is likely to be in line with your parent's wishes (given what the will says). 

[Note that your own house would form part of your estate but if you left it to your children there is a residential nil rate band that can be claimed, though it is capped. However who knows what the inheritance tax limits will be in the future so it may be sensible using a deed of variation even if your estate would currently be under the IHT threshold.]

getmore4less

If you can show the benefitial interest was your mother's then your legal joint interest is as a trustee just as if you held the money in a sole account on behalf of someone else.

As another example
Executors can  up accounts in their own  name on a similar basis.