IHT & Gift to a Joint Bank Account.

[JonE]

Joint bank accounts between spouses can be tricky and there are several points arising in law and in HMRC concessions regarding each joint tenant legally owning 100% of the balance. Less is discoverable about treatment of other joint bank accounts except for obvious beneficial interests such as when the joint tenancy is to enable, say, a child to assist a parent in management of the account. I have seen mentions of 'In re Figgis' but haven't found the source.

So... Donor (D) transfers funds to a long-standing bank account which is jointly-owned by Spouse (S) and Another (A) - but not D so no benefit is reserved and it looks like a straightforward 'transfer of value' with not even the slightest hint that a loan is intended. The same value is soon withdrawn by A from that S&A joint account (which is otherwise funded and operated by both parties). In the absence of any documentation there could be differing interpretations of this for IHT purposes.

1. D has made an inter-spouse lifetime transfer to S of the full amount which went directly from D's other resources into the S&A account (rather than into a pre-existing D&S joint account) and whatever happened subsequently is no concern of D's.

2. If simply following the money and 'seeing through' anything between source and final destination: D has made a PET to A of the full sum. This interpetation would require knowledge of outward transactions on S&A account but D and D's executor may not have access to that knowledge.

3. D has made an inter-spouse lifetime transfer to S for half the value and a PET to A of the other half - but D's executor would have no knowledge of whether beneficial interests in this account were actually 50:50 or something else.

If D predeceases S then how should D's executor treat the transfer - 100% exempt transfer to S or 100% PET to A (though knowledge of A withdrawing total may not exist) or 50:50 (though knowledge of actual beneficial interests may not exist)?

If, on the other hand, D's executor had access to contemporaneous documentation recording D's intent, would that take precedence over any treatment that HMRC might deem to be the 'correct' interpretation of legislation? I haven't been able to find anything specific to this situation in the manual and am not clear on what general principles HMRC may apply.

Just as an aside, similar questions arise for S's executor if S predeceases D. Was the account used merely as a conduit from D to A with S having no involvement so making no gift personally or has S made PET to A of full amount that entered the S&A joint account or is 50% of that sum to be treated as from D to A such that only 50% was ever attributable to S and therefore the PET from S to A is just that 50%? I'm not looking to address this situation directly as the executor of S would have a different state of knowledge regarding the S&A account and I expect much else would generally follow-on from consideration of the primary scenario.

Pointers to relevant sources and/or direct knowledge of custom & practice would be appreciated.

Cheers!

[UnclePhilip]

Useful link?

In particular, paras 48-53:

http://www.bailii.org/cgi-bin/format.cg ... ry=(figgis)

[Lootman]

Joint bank accounts between spouses can be tricky

I would have thought that joint accounts between spouses are not tricky at all. In general movements and transfers of cash between spouses are considered normal and natural events within a marriage. As such they are not deemed to be tax events and are neither reportable nor taxable at the time. Indeed it is unlikely that such spouses would even bother to keep records. That is true even if the spouses hold separate individual accounts and so certainly true within joint accounts.

Often such accounts are used for everyday household expenditure and so there will be many transactions in and out over time, often with no clarity as to which spouse did what. The idea that a third party could make any sense of the voluminous transaction history of such an account seems unlikely. And of course since a joint account bypasses probate upon the first death, and since there is no IHT between spouses anyway, I cannot imagine why executors would concern themselves with activity within a spousal joint account.

It gets a little more interesting if one of the spouses is a non-dom since then IHT could apply between them. Although again I wonder how that happens in practice, and especially if the non-dom spouse is overseas.

Then you have joint accounts where the account holders are not spouses. Then the taxman might be very interested in account activity for the 7 years before the first death. Although again how easy it is to develop a full understanding of the cashflows might be tricky. And given that the resolution of the joint account upon the first death bypasses probate and the money immediately vests in the surviving tenant, I suspect that in practice a lot of times it just falls through the cracks.

[JonE]

Useful link?

Thanks for that, Unc. Interesting - but not obviously useful. Main focus is a previously undeclared (for IHT) joint account in which the deceased had an interest. It provides another reference to Figgis and clicks-up yet another mention of 'presumption of advancement' to add to those I've already encountered. Interesting to note how precise liability for the revised IHT depended on the property being settled (disturbing settled v non-settled computations) and fell according to role as executor and/or trustee and beneficiary.

I note in passing that the document was released less than a fortnight before the offices of Special Commissioners were abolished.

Cheers!

[JonE]

I would have thought that joint accounts between spouses are not tricky at all.

Note that I observed only that spousal joint accounts can be tricky - not that they invariably were. You even suggested a circumstance yourself where a spousal account might be tricky! As you are clearly aware, probate and IHT are different matters when it comes to 'bypassing' but none of this is actually relevant as the rest of my post did not concern transactions in spousal joint accounts.

In fact, it did not concern transactions in any account of which D was a joint tenant. The only transaction D's executor can definitely see when D predeceases S is from D's sole account to a joint account held by S&A and the whole point of my post is regarding treatment of that transaction in the absence of documentation and to what extent, if any, documentation of D's intent would make any difference.

Cheers!

[genou]

Donor (D) transfers funds to a long-standing bank account which is jointly-owned by Spouse (S) and Another (A)

My emphasis. There's the nub. Is it demonstrably jointly beneficially owned, or is one of S & A merely an administrator on the other's behalf. Once you know that , you know to whom ( objectively ) D was transferring value. If you want to have an argument about D's understanding of the nature of the account, good luck with that - contemporaneous notes by D / documentation around the transfer maybe.

But it does raise the question - absent a clearly available and documented understanding by D of the beneficial ownership of the joint account why would anyone think that the transfer was not 50/50 S&A.

What happens after that follows fairly obviously I think.