Dispelling the myths around joint accounts

There are many myths about joint accounts, especially concerning what happens if something happens to one of the joint account holders.

Many people think that having a joint account will resolve many issues when helping a parent or partner with their finances.  Unfortunately some banks and building societies suggest that this is a far simpler way of dealing with matters than having a Power of Attorney on the account.   What they don’t often make clear is that having a joint account has many implications. 

For example, let’s look at a case of a mother who owns all the funds in her accounts and is the only person contributing to them. As she struggles to pay her bills and to make sure she doesn’t go overdrawn, her daughter is added onto her accounts (including to Mum’s savings accounts) so as to help mum with her finances.  There is also a son, but he lives further away and is therefore unable to help out as much.

So what could go wrong?

Mum dies

On mum’s death, her daughter automatically owns the accounts.  It does not matter that mum left a Will leaving everything equally.  Even if Mum died without a Will, her daughter would still inherit all of the accounts. 

The daughter becomes bankrupt

If her daughter has difficulties with money or gets into debt and becomes bankrupt, then the joint accounts would be looked at to pay the daughter’s bills – even if the daughter did not contribute to the accounts.  Under the law, joint accounts belong to both parties whether they put money into the account or not. 

Additionally, if the daughter does have money problems, it might be tempting to “just borrow” the money from Mum’s account.  The intention is to pay it back but somehow that never happens.

The daughter divorces

This is more common than becoming bankrupt, but the same law applies.  The joint account will be taken into account as a matrimonial asset.

Mum and daughter fall out

People fall out all the time and not just with big rows, but over little things too.  With any joint account, any one of the owners is able to take all the funds out at any time without the other owner’s permission. In this scenario, if the daughter fell out with her mother, she could take all the money from the joint accounts.

Mental incapacity

If Mum becomes mentally incapable, technically the bank can freeze the account until someone has legal authority to access the funds.  This would usually be by way of a Court of Protection order which can take months to obtain.  How would Mum be looked after financially, until the order comes through?

Sharing bank cards and PINs

Many people mistakenly believe they can use Mum’s bank card with her permission, but you cannot share PIN numbers with anybody as this is a breach of the bank’ terms and conditions. Another common misconception is that you could access Mum’s account by using her password and login details.  This is in fact an offence under the Computer Misuse Act. 

So what to do?

The best way to deal with all of the above is for mum to have a power of attorney for property and financial affairs.  Not only does this give legal authority to do all of the things that need to be done but also provides protection for both parties and ensures that none of the nasty side effects as set out above can occur.  It also allows mum to choose who should deal with her finances rather than the Court of Protection making an order.