If you are the executor of a loved one's will, you have a legal duty to value their estate accurately and distribute their assets according to the intentions laid out in their will. The consequences for failing to do this can be serious, particularly if the estate's value is near to or above the Inheritance Tax threshold of £325,000, as reaching the wrong value when calculating it for tax purposes can lead to inadvertently paying the wrong amount of tax, which could accrue interest and penalties.

At the same time, the position of joint assets like bank accounts or property can be ambiguous. Many people assume that the funds in joint accounts held by married spouses or those in a civil partnership are divided equally, and that each partner is free to dispose of their share as they wish in their will. However, this is rarely the case unless the joint account holders have a specific contract or agreement in place - under most circumstances, a joint bank account is treated like many other types of jointly-owned asset where, when one account holder dies, all the money passes to the remaining account holder(s).

Here, the wills and probate experts at JMW explain what usually happens to joint bank accounts during the probate process. We also outline the different structures of joint accounts, how to determine whether assets automatically pass to the surviving joint owners or not, and what to do if you are disinherited because of a misunderstanding about what would happen after an account holder dies.

Who Inherits a Joint Bank Account Owned By Multiple Account Holders?

When a joint bank account is opened, it can be held in two ways: the joint account holders may be joint tenants or tenants in common. Each arrangement has different consequences for probate, Inheritance Tax, and asset distribution considerations, so it is important to review any paperwork relating to the account when managing a deceased person's estate and determine which type of account they held.

Most joint bank and building society accounts in the UK are held by the account holders as joint tenants, which means that all partners own all the funds within the account jointly and equally. When one person dies, the other account holders inherit through the right of survivorship and control of the account passes to them automatically. The last surviving partner in this case becomes a sole owner of the account, at which point it becomes part of their estate.

Before this point, when one party dies but at least one surviving account holder remains, the account does not form part of the deceased’s estate for distribution purposes. The full balance of the account may still count towards the value of their estate for Inheritance Tax purposes if they were the sole contributor, meaning that the person's share is the entire value of the asset, or their proportionate share of the account will count for Inheritance Tax where contributions have been made by more than one party. This does not prevent the account from passing automatically to the surviving account holder if the owners were joint tenants.

What Happens to a Joint Account Held as Tenants in Common?

Alternatively, a joint account may be held as tenants in common, in which case it will be subject to different rules. This is rare for bank accounts, although it is much more common for property and other shared assets. It is possible to set up an account in this way, such that it does not automatically pass to any other account holder when the first account holder dies.

When a joint account is held as tenants in common, each person owns a defined share of the asset. When an account owner dies, the deceased’s share forms part of their estate and is distributed according to their will or under intestacy rules, rather than passing to the surviving account holder. In such a case, it would be subject to probate and Inheritance Tax like any other estate assets.

Most banks and building societies will treat shared account holders as joint tenants, and adjusting this requires clear, formal evidence that the parties intended to hold the account in fixed proportions, rather than equally and with automatic survivorship. However, the legal treatment of a joint account will depend not only on who was named as an owner but also on why it was created and how the money was used. For example, the courts may decide to retrospectively treat a joint account as held on resulting trust or in fixed shares, depending on the circumstances and whether they support that outcome. This is possible in circumstances where:

• one party contributed all the funds;
• the account was set up for convenience (e.g. to pay bills, not as a gift);
• there was a clear written agreement about ownership proportions; and/or
• there is evidence that the surviving account holder was not intended to benefit on death.

In such cases, ownership may be split according to contribution or agreement, and the deceased’s share can be included in the estate. If you are administering someone's estate and have questions about the legal position of any assets of this nature, speak to a solicitor for advice on whether an account can be held as tenants in common and what the tax implications of this would be.

What if the Person's Will Says I Should Receive an Inheritance From a Joint Account?

If the account automatically passes to the other account holder and is not part of the deceased's estate, they cannot leave instructions in their will for how it should be managed. This means that you will not receive any inheritance that was due to come from the account, and the funds in the account will not form part of the residuary estate that is usually divided among beneficiaries after specific gifts are distributed.

In cases where testators are not aware of this rule, this can leave certain parties disinherited unintentionally. When this happens to close family members who were financially dependent on the deceased, there are actions you can take to rectify the position, although you may not receive an inheritance in line with the deceased's original intentions. In such a case, you may be able to claim for financial provision under the Inheritance (Provision for Family and Dependants) Act 1975. A solicitor can advise you of this process and whether or not it is a possibility in your circumstances.

It is important to remember when writing your will that disputes can arise between beneficiaries and surviving joint holders, particularly in blended families or where inheritance expectations differ, due to the right of survivorship. For this reason, you should document an account’s purpose clearly when you set one up and keep records of who paid in and who used the funds.

Finally, executors should remember that not all joint accounts are excluded from a person’s estate: the way the account is held, who contributed the funds, and what the account was intended for will all affect how it is treated legally and for tax purposes. If you are in doubt, contact the expert probate solicitors at JMW for clarification on how a joint bank account should be treated and how this affects the other assets within the deceased's estate.