Banking, joint accounts

Phanc60844

Following the death of my farther, my mother has suggested that I remove his name from their joint accounts and replace it with mine. That way ,if she becomes unable to draw money for whatever reason ,I can manage her money for her. Also, would that mean that when the time comes, the money would transfer to be as the surviving account holder without probate?

Secondly, I'd like to transfer it to a high interest 1 year bond to top up the lost pension. Now who is liable for the tax on this ,being a joint account? My interest allowance is already used up so I don't want to take on any tax liability for money that isn't coming to me. When I setup the account they ask for the name and account details for the recipient so I'm assuming the tax bill if any would go to my mother?

Thanks

Paul 

Keep_pedalling

What your mother really should do is make a lasting power of attorney (LPA) for finance.

It’s quite easy to avoid probate where no property is involved by keeping the amount held with any financial institution below their probate limits, which can be high as £50k.

Barkin

Keep_pedalling said:

What your mother really should do is make a lasting power of attorney (LPA) for finance.

It’s quite easy to avoid probate where no property is involved by keeping the amount held with any financial institution below their probate limits, which can be high as £50k.

Or can be as low as £5k

Keep_pedalling

Barkin said:

Keep_pedalling said:

What your mother really should do is make a lasting power of attorney (LPA) for finance.

It’s quite easy to avoid probate where no property is involved by keeping the amount held with any financial institution below their probate limits, which can be high as £50k.

Or can be as low as £5k

Not too many of those, just avoid them which is what I did with my mother’s accounts while managing them as her attorney.

Zanderman

Tax on interest on a joint account is jointly liable - so you will be liable for half of it. Shouldn't matter what the account address is, it is the people named on the account - which will include you - who are liable for any tax. 

Re probate, if it's a joint account yes you'll avoid probate for that account as it will in effect become your money, not part of the estate, if I understand things correctly. That also avoids any worry about IHT on that money, which would still need to be considered if was in one name.  (Edited to add - though arguably, adding your name to the account is gifting you money, so could, in theory at least, need to be considered as part of the estate and possibly liable for IHT if mother died within 7 years).

Re avoiding probate like Keep_pedalling suggests, by just keeping below the financial limits of any organisation, yes that can work.  But, having just gone through probate for a relative with several accounts I can say with confidence that some institution's 'no-need-for-probate' limits are nowhere near 50k - so in many cases you would still need probate if following that suggestion. Depends on the amounts, obviously. 

Barkin

Zanderman said:

 having just gone through probate for a relative with several accounts I can say with confidence that some institution's 'no-need-for-probate' limits are nowhere near 50k 

Likewise.  NS&I for example is £5k

IanManc

Zanderman said:

Tax on interest on a joint account is jointly liable - so you will be liable for half of it. Shouldn't matter what the account address is, it is the people named on the account - which will include you - who are liable for any tax. 

Re probate, if it's a joint account yes you'll avoid probate for that account as it will in effect become your money, not part of the estate, if I understand things correctly. That also avoids any worry about IHT on that money, which would still need to be considered if was in one name.  (Edited to add - though arguably, adding your name to the account is gifting you money, so could, in theory at least, need to be considered as part of the estate and possibly liable for IHT if mother died within 7 years).

Re avoiding probate like Keep_pedalling suggests, by just keeping below the financial limits of any organisation, yes that can work.  But, having just gone through probate for a relative with several accounts I can say with confidence that some institution's 'no-need-for-probate' limits are nowhere near 50k - so in many cases you would still need probate if following that suggestion. Depends on the amounts, obviously. 

You are wrong about the inheritance tax implications.

Where there is a joint account held by a parent and a child then inheritance tax liability depends on the proportion of the money that each person has contributed.

In the OP's case all the money would have been contributed by the mother, so the whole of the amount in the account would be included in her assets in the calculation of IHT. No inheritance tax would be avoided.

https://www.thegazette.co.uk/wills-and-probate/content/103479

https://www.taxinsider.co.uk/inheritance-tax-pitfall-whose-money-is-it-ta

Nor is a parent putting money into a joint account a gift to the child who holds the account jointly. The potential of a gift of the portion of the money would arise if the child made a withdrawal of money from the account.

Zanderman

IanManc said:

Zanderman said:

Tax on interest on a joint account is jointly liable - so you will be liable for half of it. Shouldn't matter what the account address is, it is the people named on the account - which will include you - who are liable for any tax. 

Re probate, if it's a joint account yes you'll avoid probate for that account as it will in effect become your money, not part of the estate, if I understand things correctly. That also avoids any worry about IHT on that money, which would still need to be considered if was in one name.  (Edited to add - though arguably, adding your name to the account is gifting you money, so could, in theory at least, need to be considered as part of the estate and possibly liable for IHT if mother died within 7 years).

Re avoiding probate like Keep_pedalling suggests, by just keeping below the financial limits of any organisation, yes that can work.  But, having just gone through probate for a relative with several accounts I can say with confidence that some institution's 'no-need-for-probate' limits are nowhere near 50k - so in many cases you would still need probate if following that suggestion. Depends on the amounts, obviously. 

You are wrong about the inheritance tax implications.

Where there is a joint account held by a parent and a child then inheritance tax liability depends on the proportion of the money that each person has contributed.

In the OP's case all the money would have been contributed by the mother, so the whole of the amount in the account would be included in her assets in the calculation of IHT. No inheritance tax would be avoided.

https://www.thegazette.co.uk/wills-and-probate/content/103479

https://www.taxinsider.co.uk/inheritance-tax-pitfall-whose-money-is-it-ta

Nor is a parent putting money into a joint account a gift to the child who holds the account jointly. The potential of a gift of the portion of the money would arise if the child made a withdrawal of money from the account.

Thanks, my own edit had already expressed my doubts that money in a joint account would avoid liability for IHT.  So thanks for confirming the details that it would not and why.

OP was not, of course, referencing IHT at all, just outlining a plan to transfer assets without needing grant of probate first, so the IHT side of things may or may not be an issue. I was probably muddying the waters by bringing up IHTax - it was OP's suggestion of avoiding income tax on interest (which they can't) that made me raise it as an additional issue.