Joint account, who declares the interest.

6022tivo

Hello

A close friend wants to add me to their savings account, so it is a joint account. This is so upon their death I easily inherit this account to pay for funeral expenses ect and not to confuse matters.

Now, I claim Tax credits and the interest of accouts I own have to be declared (about £300 PA). The interest in this account is above this, so should I declair it, or if they catch up with it, can I just say my name is on the account but the monies are not really mine??

Reading this back, it does not make sense, but I think some of you will get the idea??

telly-addict

If it is a joint account then you each need to declare 50% of the interest. For Children's Tax Credits they only assess the excess above £300, not sure if it is the same for Working Tax Credits. Would this interest make a huge impact on what you receive?

6022tivo

Yep, about 1500 interest PA. Thanks for clearing up the 50% thing, I did not know that.

If I put my cash in a childs name, is this tax avoidance and do people get charged, fined for doing this often??

Pinkleylandii

Hi

The Revenue have legislation ( Section 660B ICTA 1988), which states that where a parent gives a child (under 18 and unmarried), a capital sum from which interest received per annum exceeds £100, then that interest is taxed on the parent rather than the child. So putting the capital into your child's name would be a non starter.

Cheers

John

Al_Mac

6022tivo wrote:

This is so upon their death I easily inherit this account

You don't and you could get in trouble for touching it/emptying it.

6022tivo

A couple of quick things I have noticed, the first is the interest on the childs account over £100??. That is interesting, what if for example an relative changes a house ownership to the crandchildren, I know about the 7 yr rule for Ih Tax, but this is ok??

And regarding the "easily inherit" the account thingy, if it is a joint account, no probate etc matters, it just transfers to the surviving party, if it is within 7 years, then it would have to be considered for Ih tax??

If this is wrong, then my solicitor requires a slap.

sneekymum

6022tivo wrote:

what if for example an relative changes a house ownership to the crandchildren, I know about the 7 yr rule for Ih Tax, but this is ok??
QUOTE]

Not if the relative continues to enjoy the benefit of the house.

It would be like the gift never happened (under pre-owned assets rules)

The relative would need to pay those new owners a true market rent - and the owners (grandchildren) would need to declare it for income tax.

MarkyMarkD

6022tivo wrote:

A couple of quick things I have noticed, the first is the interest on the childs account over £100??. That is interesting, what if for example an relative changes a house ownership to the crandchildren, I know about the 7 yr rule for Ih Tax, but this is ok??

And regarding the "easily inherit" the account thingy, if it is a joint account, no probate etc matters, it just transfers to the surviving party, if it is within 7 years, then it would have to be considered for Ih tax??

If this is wrong, then my solicitor requires a slap.

The 7 years is from when the money is transferred. In the joint account scenario, the transfer is upon death and therefore the 50% share is fully subject to IHT.

The grandchildren property transfer is not effective if the grandparents keep living there - read up on "gifts with reservation".

sneekymum

6022tivo wrote:

And regarding the "easily inherit" the account thingy, if it is a joint account, no probate etc matters, it just transfers to the surviving party, if it is within 7 years, then it would have to be considered for Ih tax??

If this is wrong, then my solicitor requires a slap.

No it doesn't pass to the surviver - don't you know of cases where joint accounts are frozen when one half of a couple dies? - leaving great trauma and embarassment. Couples should keep some money in accounts in just their own names just in case.

Yes it would have to be declared for IHT if there's evidence that it was a gift. Without such evidence, and if it doesn't get a mention in the will, you'll be paying it back.

sarahlouise210

Is this situation really necessary??? There are schemes available now where you can pay for your own funeral in full up front while you are alive.. your friend could do this or you could arrange it for them using the funds in the account. You would not then need to worry about the tax credit implications and having £1500(or £750 ??) in interest would affect your claim if you are receiving anything above the basic family element of Child Tax Credit...a serious consideration if you will not actually be in receipt of this money. Alternatively they could put the necessary amount in an account in your name which would attract less interest and be less of a financial problem for you. An account that generates £1500 per year in interest would more than pay for for funeral expenses. As previously said.. adding you to the account will not automatically mean you can clear the account, this being the case it really undermines the reason that your friend wants to do it in the first place.

mbamick

If the issue is one of having access to cash, to pay for funeral costs, I'm confident that there is no need to establish a joint account. Although bank accounts [in single names] are frozen on presentation of a Death Certificate, all banks will use the available balance to pay funeral costs - usually direct to the funeral director, on presentation of their bill. I have had to do this twice in the last couple of years; the first time with Lloyds TSB and the latter with HSBC. Any excess balance is held until production of the Will by the executor of the estate; if no Will is available, the balance is issued to the immediate next-of-kin.

If the issue is one of simply having access to the account, it is possible to have two authorised signatories on an account which is in a single name. My Mother lives 200 miles away and, very occassionally, needs extra cash. Rather than messing around with cheques & postal orders, I have simply arranged for her to be a signatory on my bank account. If she needs cash, she simply gives me a courtesy call then strolls to the bank and asks them to complete a Counter Cheque on her behalf.

My layman's understanding of this latter approach, and other methods [such as Power Of Attorneys], is that these authorities cease on the death of the account holder.

A couple of other points spring to mind; your friend could arrange a pre-paid funeral plan [I understand that there is a good safety-net in place for such plans now]. Alternatively, they could have the interest paid into a separate account in their name, so that there is a clear audit trail to prove that you weren't the beneficiary of the interest payments.