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Quick Question on Opening a Joint Account with a parent re: IHT

BR5500
Posts: 58 Forumite

in Cutting tax
I've recently read online that if you put your savings accounts in a joint name with your child, this gets around the 7 year rule and on the death of the parent, the child automatically inherits the balance of the joint account - in the same way as a spouse would.
I'm sure this is totally incorrect as the balance of the joint account would no doubt be subject to IHT scrutiny, if jointly held by a parent and child. I'd greatly appreciate clarification on this though.
As I say, I'm sure it's incorrect as if it was possible, everyone who trusts their child would do this with their savings to avoid any IHT!
As I say, I'm sure it's incorrect as if it was possible, everyone who trusts their child would do this with their savings to avoid any IHT!
All I could find on this subject myself was the following, which pretty much confirms my opinion that a joint account with a parent is not a way around IHT:
Incidentally, my parents' total estate is well below the current IHT threshold but I'm pessimistically thinking along the lines of IHT thresholds being lowered in future.
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but I'm pessimistically thinking along the lines of IHT thresholds being lowered in future.
This seems highly unlikely, although the fact they are frozen does effectively decrease than in real money each year.1 -
My (inexpert) understanding is that in the case of joint accounts, although the survivor automatically inherits whatever is in the account, but for the purposes of probate half the amount is usually considered to be part of the estate - and if it can be shown that the account was funded soley by the deceased, HMRC could consider it to be potentially up to 100%.
According to this link there are questions on the IHT forms relating to this.
What happens to a joint bank account when someone dies? | The Gazette1 -
Yes, I'm pretty sure that opening a joint account with a parent is probably not a great idea as it is almost bound to trigger an HMRC investigation to establish how much of the joint account was funded by the parent and this amount would be considered for IHT. As I say, I'm way below the current IHT threshold but I just wanted to confirm it's not an option. As is sometimes the case, trying to be too clever can result in more issues in the future!0
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