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The Dangers of Trusting a Relative to Safeguard Your Finances Using a Jointly Owned Bank Account
The recent case of Re Northall (deceased) highlights the importance of getting legal advice before transferring money into joint bank accounts.
One of Mrs Northall's sons had helped her to finance the purchase of her council house and, when she eventually sold it, she moved the proceeds of the sale into a joint account that had been specifically opened with one of her other sons, Christopher. In the 18 days before Mrs Northall's death, Christopher had transferred over £28,000 out of the account and then, on the day after her death, he transferred the remaining balance into an account held jointly between him and his wife.
Importantly, as the account in which she held the money included the 'right of survivorship', this transfer prevented any other members of the family from receiving a share of the money after her death. 'Right of survivorship' means that on the death of one of the joint account holders the co-owner would be entitled to the whole of the remaining balance absolutely
Christopher told the court that he had been making payments out of the account on his mother's instructions and he said that it was her intention that he should receive the balance of the account on her death. It was for this reason that the money had been transferred into such a joint account.
In law there is a principle called a 'resulting trust' which means, in cases like this, there is a presumption that the beneficial shares to the account will be determined by the parties' respective contributions into it. In this case, Mrs Northall had contributed 100% of the monies so the presumption is that after death, her estate should be entitled to the entire balance. This presumption can be reversed, however, by evidence showing that the party in question had intended that the money was advanced by way of gift. Christopher had no such evidence and the burden is on the person making such a claim to prove it.
The Judge talked specifically about the nature of the account and found that although the information form that came with the account stated explicitly that the account was one with the right of survivorship, there was no evidence showing this had been brought to Mrs Northall's attention. In a different case of similar facts, where it was shown that the right to survivorship present in the account had been brought to the party's attention, this fact was enough to reverse the presumption. In practice, however, providing such evidence is only really possible if a detailed attendance note (such as one provided by a solicitor) had been made.
The Judge's decision in the Northall case was that Christopher had to not only pay back the balance of monies from the account that he had transferred to himself and his wife after his mother's death but also every payment he had made from the account where he did not have evidence showing the payment was made on his mother's instructions. This means that even if Christopher had bought something genuinely asked for by his mother but did not have the evidence to show it, he would have to pay the estate back that sum.
Whilst, to some the decision might seem somewhat harsh on Christopher, the Judge must have decided, based on the facts that the large majority of outgoings from the account were for Christopher's own purposes. This ruling could have a substantial impact on future cases if, as in this case, evidence of the parent's intent cannot be presented. Children or carers might find themselves having to pay back sums to the estate that were honestly paid out for the benefit and on the instruction of their relative.
The problem would never have arisen if Mrs Northall had created a Lasting Power of Attorney to control her financial affairs, instead of trusting her son to jointly control her funds. This is a document that appoints certain persons to act on your behalf during your lifetime and gives the creator full control in the respect of the powers that the appointed persons have over their affairs. It can cover solely financial transactions or extend to specific personal choices that may arise such as types of medical treatment to be received. Safeguards imposed by the Court of Protection limit the chances of the document being abused.
This case highlights the importance of seeking legal advice in respect of both long-term care provision and opening joint bank accounts for the purpose of making gifts or transferring the proceeds of sale of a property to family members.
If you would like any information regarding Lasting Powers of Attorney or the tax implications of making life time gifts please contact Jenny Pierce. If you feel you have been deprived of an inheritance by the actions of a friend or family member please contact Elizabeth Fry.