This default position can be rebutted in certain circumstances.
1. If there is clear evidence that the account was put into joint names with the intention of making a gift to the surviving co-owner, then the surviving co-owner will be entitled to the funds.
2. If the surviving co-owner is the spouse or child of a deceased co-owner, then the “presumption of advancement” will displace the presumption of a resulting trust and the funds will advance to the spouse or child, unless there is evidence that this had not been the intention of the deceased.
In summary, if no consideration was paid by the survivor, if there is no evidence of intention to make a gift, and if the surviving co-owner is not the spouse or child of the deceased, then the survivor holds the funds on trust for the estate. This means that the funds will be distributed in accordance with the terms of the will of the deceased or, if the deceased has not made a will, in accordance with the laws of intestacy.
Joint accounts in Ireland
Often, this is done “for convenience”, with the intention of enabling the son or daughter to operate the account for the benefit of their parent: to pay, for example, various day-to-day expenses on the parent’s behalf.
In such circumstances, the funds remain the property of the parent and, on the death of the parent, form part of the parent’s estate. The surviving joint account holder is said to hold the funds on a “resulting trust” for the estate. In other words, no beneficial ownership passes to the surviving joint account holder at any time.
Sometimes, the parent might wish for the child to take a benefit from the account, either at the time the account is put into joint names or, more often, on the parent’s death. There might, in other words, be an intention on the part of the parent to make a gift to the child.
A parent might also intend for both situations to apply successively. While they are alive, the parent might want the child to operate the account for the parent’s benefit and convenience but intend, at the same time, that the child should succeed to the ownership of the account after the parent’s death.
The Account Mandate
In all cases, whether the new name is to added with the intention of conferring a benefit or merely for conveience, it is extremely important that the older person be afforded the opportunity to receive independent legal advice. This will ensure that they fully understand the effect of putting another name on their account and that they are not subject to any undue influence. Their intentions should be made clear to all parties - including the bank - written down, and acted upon.
The account mandate should be reviewed and signed by all account holders and copies retained.
What is a Resulting Trust?
As a general principle of law, where the legal ownership of a property is transferred from one person to another and the transferee (the person who receives the property) gives no consideration (or payment) for it, then the transferee is presumed to hold the property on a resulting trust for the transferor.
The transferee can rebut this presumption by providing evidence of the transferor’s intention to make a gift.
Alternatively, and to similar effect, the presumption of advancement might apply. Whether it does or not will depend on the relationship of the people involved.
What is the Presumption of Advancement?
In a situation where funds are placed by one person into a joint account with another, the doctrine operates to presume that the parties hold the beneficial interest jointly and, ultimately, for the benefit of the survivor.
The presumption of advancement, like the presumption of a resulting trust, can be rebutted by contrary evidence. In other words, if there is evidence that an advancement or gift was not intended, this evidence will override the presumption of advancement and the default position, that of the resulting trust, will apply.
Gender Discrimination and the Presumption of Advancement
- from husband to wife,
- from father to child, and
- from a man, or his widow, to a child in respect of whom he, or she, stands in loco parentis.
Thus, the presumption operated for advancements made in one direction only, in each case proceeding from a male (or a female ‘standing in’ for her deceased husband) to a female, or child.
The rules are archaic and contrary to modern equality legislation.
The historical basis of the law was that a husband or father was regarded as having a moral duty to provide for his wife or child; it seems clear that a wife or mother was thought not to be similarly encumbered. As one might deduce from this line of thinking, the case law in Ireland dates back many years, to a time when wives were financially dependent on their husbands and property was held, almost exclusively, in male hands. In the light of various other pieces of progressive legislation, including the Marriage Equality Act 2015, the rule seems ever more outdated. If the question came before the courts today this distinction, based solely on gender grounds, would likely be deemed unconstitutional and incompatible with Protocol 7 of the European Convention of Human Rights. However, in the absence of reforming legislation, these matters would need to be pleaded before the High Court.
While the law remains unchanged then, at least in theory, the husband or child of a woman who has attached their name to her funds in a joint account would not accede to any beneficial interest in the account after the death of their wife or mother based on the presumption of advancement. They would be deemed instead to hold the funds on a resulting trust. If the husband or child were to seek to become beneficially entitled to the funds and this was, for some reason, opposed, then they would need to take legal advice on the specifics of the case.
Evidence of the Transferor’s Intention to Make a Gift
The law in regard to this was established by the Supreme Court in the case of Lynch v Burke and AIB (1996).
In that case, the factual position was quite clear. The surviving co-owner and the first-named defendant, a niece of the deceased, had attended with the deceased at the bank when the account was opened and, while the deceased made all the lodgements, the account book was marked payable to the deceased or the survivor and signed by them both.
In the deceased’s will she left all her estate to the plaintiff who claimed the funds in the account on the basis of the existence of a resulting trust.
However, it was ultimately held on the facts that a contractual relationship existed between the two co-owners and that the surviving joint owner was entitled to the beneficial ownership of the money on that basis or, alternatively, as a gift.
The court held that there could be no other interpretation based on the facts put before it in that case. Accordingly, it would appear that, if another surviving joint account holder were to seek to rely on Lynch v Burke and AIB, they would have to present an equally compelling set of facts.
The detail contained in the Account Mandate would likely be crucial.
This applies to An Post Savings Accounts and Credit Union Accounts.
The most that can be nominated on a Credit Union account under the Credit Union Act 1997 is €23,000. Any amount greater than this reverts to the estate and will be disposed of according to the will of the deceased if there is one or, if there is not, according to the rules of intestacy
Nominations also apply to funds payable under certain pension schemes and death-in-service benefits.
Capital Acquisitions Tax
Section 13 of the Capital Acquisitions Tax Act 2003 deals with the transmisson of funds through a joint account:
(1) On the death of one of several persons who are beneficially and absolutely entitled in possession as joint tenants, the surviving joint tenant or surviving joint tenants is or are deemed to take an inheritance of the share of the deceased joint tenant, as successor or successors from the deceased joint tenant as disponer.
(2) The liability to inheritance tax in respect of an inheritance taken by persons as joint tenants is the same in all respects as if they took the inheritance as tenants in common in equal shares.
Section 10 of the same act deals with nominations:
(1) For the purposes of this Act a person is deemed to take an inheritance, where, under or in consequence of any disposition, a person becomes beneficially entitled in possession on a death to any benefit (whether or not the person becoming so entitled already has any interest in the property in which such person takes such benefit), otherwise than for full consideration in money or money's worth paid by such person.
Thus, contrary to popular belief in some quarters, passing on funds after death by way of a joint account or a nomination is not a way of avoiding tax.