Joint accounts – who owns them?

Joint accounts can make life easier. If you have shared bills to pay or relatives who need help to manage their money using joint accounts might be convenient. But what seems like a solution could actually create problems.

Who really owns money held in joint accounts?

If money is held in an account that can be accessed by more than one person who owns the money?

Take these examples of joint accounts:

• You add someone’s name to your account so they can help you pay your bills
• You share a property with relatives or friends and open a joint account to use to pay household bills
• An unmarried couple open a joint account and both pay their earnings into it
• Executors of a deceased person open a joint account to hold estate funds.

In those scenarios, it seems pretty clear who owns the money in the joint accounts, doesn’t it? The reality is that it can be anything but clear. It all depends on each person’s intentions about the money in the bank account they share. The big question is what does each account holder want or expect to happen to the money if they die?

Adding a name to your account

In the case of Drakeford v Cotton and Stain 2012, the court looked at the situation of adding someone’s name to a bank account. In that case, there was a dispute over whether the funds in a joint bank account passed automatically to the surviving co-account holder following the death of the other co-account holder.

The case details

In the Drakeford case Mrs. Cotton inherited money from her husband when he died in February 2008. Shortly after the death of her husband, Mrs. Cotton added the name of one of her daughters, Mrs. Stain, to two building society accounts containing about £52,000 in total. Until Mrs. Cotton’s death in August 2008, the only withdrawals from the accounts and all the deposits were related to Mrs. Cotton. At no time did Mrs. Stain pay any of her own money into the accounts and she didn’t make any withdrawals from it.

The question to be answered following Mrs. Cotton’s death was whether funds in the account formed part of Mrs. Cotton’s estate. If the money was part of the estate then it would be shared equally between her three children. If the general rule of survivorship applied then Mrs. Stain would take all the money in the joint accounts.

Mrs. Stain argued that statements made by Mrs. Cotton less than two months before she died showed an intention by her to make an immediate lifetime gift to Mrs. Stain of the money in the accounts. If the court agreed with that argument it would mean the money was in effect being held from that point by Mrs. Cotton and Mrs. Stain as trustees for the benefit of Mrs. Stain only.

Mrs. Stain’s sister Mrs. Drakeford argued the funds in the two accounts should not transfer by survivorship to Mrs. Stain. Mrs. Drakeford acknowledged that Mrs. Stain was named as a joint account holder, but she argued that Mrs. Stain’s name was added to the accounts “purely for signatory purposes” to help their mother.

Evidence was given to the court about statements made by Mrs. Cotton and family arguments that had taken place between Mrs. Cotton and Mrs. Drakeford. The court heard that Mrs. Cotton had said to Mrs. Stain and other family members in June 2008, that she did not want Mrs. Drakeford to benefit under her will and that the money in the bank accounts was to go to Mrs. Stain when Mrs. Cotton died.

The court considered the following points:

It was agreed by the parties that in the period from 7th February 2008 to the middle of June 2008, Mrs. Cotton owned the money in the accounts. It was also agreed that when Mrs. Stain’s name was added to the account in February 2008 that was done for convenience.

The court referred to a much earlier case, Marshal v Crutwell 1857. That case established that if a second account holder is added to a bank account for convenience sake and the funds are used for only for the benefit of the original account holder that may be enough to rebut an assumption that the funds belong to both account holders.

The court’s decision

The Court’s decision in Drakeford v Cotton and Stain was that from June 2008 onwards Mrs. Stain was entitled to the money in the accounts. That was because there had been a change in Mrs. Cotton’s intentions regarding the funds. From mid-June 2008 she intended that the funds were a genuinely joint asset all of which were to pass to Mrs. Stain when Mrs. Cotton died. Therefore the bank account funds didn’t form part of Mrs. Cotton’s estate.

It’s likely that if there hadn’t been significant evidence in the form of statements made by Mrs. Cotton before she died that she wanted the money in the accounts to pass to Mrs. Stain, the court may have been more inclined to find that the monies were part of Mrs. Cotton’s estate. That would have meant the money had to be divided amongst all three of her children equally.

Tips for holding money in joint accounts

In the Drakeford v Cotton and Stain case evidence of Mrs. Cotton’s intentions played a major part in helping the court to reach its decision. Here are some tips on using joint accounts:

1. Avoid adding someone’s name to your account just for the sake of convenience.
2. Make clear statements, preferably in writing confirming your intentions i.e. is the money a ‘joint’ asset.
3. If the funds in a joint account are not genuinely joint make sure the bank is aware of that.
4. Make a Lasting Power of Attorney and a Will to make sure your wishes are legally binding.