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Case law: Court rules that friend added to bank account to 'pay utilities' inherited the account on death of original account holder

Individuals should think carefully about their intentions if they make someone else a joint holder of their bank account, or other assets, and clearly record what those intentions are in writing. If they don't, they risk inadvertently gifting the funds in that account to the joint holder if they die, a recent ruling makes clear.

April 2018

This update was published in Legal Alert - April 2018

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

A wealthy and successful businessman in his 90s added his friend to his bank account. The bank's records showed that the reason for doing so was to enable the friend to 'pay utilities' on the businessman's behalf. However, the bank's application form said:

'JOINT TENANCY: Unless otherwise agreed in writing, all money which is now or may later be credited to the Account (including all interest) is our joint property with the right of survivorship. That means that if one of us dies, all money in the Account automatically becomes the property of other account holder(s). In order to make this legally effective, we each assign such money to the other account holder (or the others jointly if there is more than one other account holder).'

The legal significance of owning a bank account jointly, with a right of survivorship, is that on the death of one of the account holders, the other automatically inherits the whole account. This is known as a 'joint tenancy'.

The businessman also left significant sums, and his home in the Bahamas, to his friend in his Will. His friend was also an executor of the Will.

When the businessman, died the bank account contained $190,000. As it was a joint account and the friend was the survivor, the bank transferred the account into the friend's sole name, in accordance with the clause in the application form.

The friend, along with the other executor, signed the Executors' Oath to obtain Probate. The schedule to the Oath referred to the bank account as part of the businessman's estate.

Despite that, the friend later added his wife to the bank account, making it their joint account. The other main beneficiaries under the Will applied to court for an order that the $190,000 was part of the estate, and had not passed to the friend automatically as a surviving joint tenant on the businessman's death.

The friend argued that the bank had told him and the businessman that, by creating a joint account, the survivor would get all the money in the account if the other died (although there was no evidence to back this up), and the businessman had still gone ahead and made him a joint accountholder. The other beneficiaries argued that all the money in the account had been put in by the businessman, and he could not have intended to gift it to the friend on his death when he added him to the account. Instead, he and the friend were holding the funds in the account on trust for the businessman. On his death the funds were therefore part of his estate and did not pass to the friend.

The Judicial Committee of the Privy Council in the UK ruled that the bank application form was paramount. Clause 20 stated that the two accountholders held the account as joint tenants, with the right of survivorship on the death of one. There was no indication that the money was being held in any other way. Clause 20 was therefore both conclusive evidence that the businessman intended to benefit his friend, and also the means by which he did so.

Operative date

  • Now

Recommendation

  • Individuals should think carefully about their intentions if they make someone else a joint holder of their bank account or any other assets, and clearly record what those intentions are in writing, or they risk inadvertently gifting the funds in that account to the joint holder when they die.

Case ref: Whitlock and another v Moree (Bahamas) [2017] UKPC 44 (Privy Council Appeal No 0075 of 2016)

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