“Financial abuse is a widespread concern” – Protecting our Future: Report of the Working Group on Elder Abuse (September 2002). The group recommended that health, legal and financial professionals should develop the skills needed to recognise, address and minimise financial abuse against older people. A 2008 HSE research study on elder abuse found that frailty and dependence amounted to over 60% of reasons for elder abuse.
One particular aspect of financial abuse that has been identified is the misuse and abuse of joint bank accounts. Older people are often encouraged to add the name of a family member or carer to their bank account ‘for the convenience’ of the older person. Solicitors should be aware of the legal implications of the transfer of a bank account into joint names and advise a client on the different rules that can apply, depending on the intention of the original account holder. 1
- Does the presumption of a resulting trust arise?
- Is there an intention to make a gift?
- Does the presumption of advancement apply?
A. Transferring an account into joint names
In advising a client on the legal implications of the transfer of bank accounts into the joint names of the older person (who is the original account owner and who has provided the funds in the account) and the name of another person, the following points should be fully discussed with the client:
- Is the reason for transferring an account into joint names simply for the convenience of the original account holder?
- Is there an intention to make a gift?
- Does the presumption of advancement apply?
A solicitor should advise a client of the implications of the access to and use of funds in an account by a joint account holder, depending on each of the above circumstances. There is clear evidence that, particularly, older people who are opening joint accounts do not always fully understand the nature of the transaction being undertaken.
1. Resulting trust
1.1. Usually at a time when older people are particularly vulnerable – for example, when being admitted to hospital or long-term care, or they may simply be physically infirm and unable to access services directly – they are encouraged to transfer their bank accounts into the joint names of themselves and some other person. They are encouraged to do this ‘for their convenience’, and the arrangement is to facilitate the second account owner to operate the account on their behalf. A solicitor should advise a client that, in such circumstances, the joint account holder merely becomes an agent for the older person. While the legal interest in the account is transferred into joint names to facilitate the arrangement, there is no intention to transfer any beneficial interest, therefore the presumption of a resulting trust arises. In such a case, on the death of the original account holder, the proceeds of the account revert on a resulting trust to his or her estate and do not pass by survivorship to the joint account holder.
1.2. A solicitor should advise any joint account holder of the legal nature of an ‘agency’ account:
- The named joint account holder (agent) only has authority over the funds in the account to the extent agreed by the original account holder (principal). There may of course be a specific agreement between the joint account holders as to how the account should be used, but this is not usually the case. However, if the account was opened for convenience only, then any withdrawal from the account should be purely for the care and maintenance of the principal. (The agreement referred to is of course distinct from the contract entered into with the financial institution as to the operation of the account and the rights of the joint holders against the financial institution.)
- If the principal becomes mentally incapacitated, the relationship of agent and principal ends. If the principal becomes mentally incapable, then the operation of the joint account automatically comes to an end, and the accounts fall to be operated either by an attorney under an enduring power of attorney that has been registered, if there is one, or alternatively by the committee of the ward if wardship proceedings have been instigated.
- On the death of the principal, the funds in the joint account pass on a resulting trust to the estate of the principal and not to the surviving joint account holder, who has no beneficial interest in the account. This can also be stated thus: on the death of the principal (original account holder) there is a presumption of a resulting trust in favour of the estate of the deceased, unless the relationship between the account holders was such as to raise the presumption of advancement, which was not rebutted.
2. Intention to make a gift
2.1. If a client wishes to make a gift, then there must be clear evidence to indicate such an intention. The first place to look for that intention is in the documentation by which the transfer is effected. If those documents themselves disclose the transferor’s intentions, then extraneous evidence is not admissible. 2
If the documentation is neutral as to intention, then clear evidence of proof to make a gift is essential. In such a case, the onus of rebutting the implications of a resulting trust by evidence rests on those claiming to be beneficially entitled by survivorship to the monies standing to the accounts in which they were named as joint creditors. 3
2.2. Where a client wishes to transfer an account into the joint names of him/herself and that of another person in order to either:
- Give an immediate gift to the joint account holder, in which case there is an immediate transfer of the legal interest in the account but there is also an transfer of a beneficial interest, or
- Alternatively, the original account owner wishes to enjoy the benefit (income) of the joint account during his or her lifetime and then for the benefit to pass to the survivor on his/her death, in which case there is an immediate transfer of the legal ownership in the account with an intention to confer a beneficial interest in the account to the survivor on the death of the original account owner, a clear intention must be indicated of an intention to make a gift either at the time of the transfer into joint names or, in the alternative, an intention to make a gift subject to a contingency, viz that of the death of the donor. 4
2.3. There may be taxation implications in either of these alternatives, and client and donee should accordingly be advised to obtain taxation advice.
2.4. In such circumstances, where there is a clear intention by the client to make a gift with regard to a joint account, a solicitor should advise the client of the impact this could have on the provisions of the client’s will, if they have made one.
2.5. In circumstances where a gift was intended, the question of undue influence may still arise.
3. Presumption of advancement
3.1. The relationship between the account holders may be such as to give rise to a presumption of advancement.5 In other words, if accounts are transferred into joint names, the relationship of the account holders may be such as to give rise to the presumption of advancement – the transaction being treated as an intention to make a gift unless it can be shown that the original account holder intended otherwise. If a presumption of advancement is established, that may neutralise the imposition of a resulting trust in favour of the estate of the deceased, and the surviving account holder may become entitled to the proceeds of the account.
3.2. The relationships that can give rise to a presumption of advancement are limited to the following:
- Husband [transfers property] to a wife,
- Father [transfers property] to a child.
The presumption of advancement does not apply in respect of a transfer of property from wife to husband, and it does not apply if property is transferred from mother to child. A solicitor should advise a client who wishes to add the name of his wife or his child to a joint account, but who does not wish the presumption of advancement to apply, of the necessity to clearly document his intention not to confer any benefit with regard to the account to his spouse or child. In which case, the presumption of resulting trust will stand and, on his death, the proceeds of the relevant account will be an asset in his estate.
If there is an intention to allow the presumption of advancement to apply, then the client should be advised of the possible need to review his will and should also be advised of the provisions of the Succession Act 1965.
A solicitor should advise the client of the likely taxation consequences if the presumption of advancement does arise.
B. Financial institutions
A solicitor, in advising a client of the legal implications of transferring accounts into the joint names of the client and that of another person, should, in addition, inform the client of the need for the client to clearly confirm the intention with regard to the joint account to the financial institution. The confirmation of intention should distinguish the type of joint account it is intended to have:
- Is it a joint account for the original account owner’s benefit only, with the joint account holder merely acting as agent for the principal?
- Is it a joint account where there is an intention that both parties should enjoy the benefit of the joint account, that is, to confer a gift on the joint account holder either at the date of the opening of the account or on the death of the original account holder?
- If the transfer is from husband to wife or father to child, is it the intention of the transferor to benefit (make a gift to) wife or child?
A client should be advised that the agreement with regard to the reason (intention) for putting the account into joint names should preferably be in writing. A client should be also advised of the distinction between any agreement between the joint account holders themselves and any contractual agreement between the financial institution and the joint account holders that will set out the requirements with regard to the operation of the joint account and the rights of the joint account holders against the bank.
C. Administration of estate
On the death of the original account holder, it is extremely important that the true intention for the opening of any joint account is ascertained.
A solicitor who is advising in the administration of an estate should make sure that full enquiries are made and that there is no attempt to either facilitate fraud6 or frustrate the wishes of the deceased. A solicitor should advise a personal representative of an estate of the duty of full disclosure of all assets and, where assets were in the joint names of the deceased and some other person or persons, the duty to make full enquiries and disclosure with regard to the intention of the deceased with regard to assets held in joint names.
Where a grant of representation to the estate of a joint account holder is being extracted, there is a requirement for the personal representative to make a return to the Revenue Commissioners and to complete a form CA24, which raises a very specific question with regard to any property that was in the joint names of the eceased and another (or others) at the date of death. 7
The Probate Office may also raise questions where it is on notice of property held in joint names. 8
Where the only asset in the estate is a joint bank account, and it appears that it may not be necessary to extract a grant of representation to the estate of a deceased, it is particularly important for solicitors to ensure that the personal representative is fully advised of the legal position with regard to property held in joint names.
If there is no clear intention of evidence to make a gift, then the equitable principle of the presumption of a resulting trust will apply. If there is an argument to the contrary, then the onus of rebutting the presumption of a resulting trust lies with the surviving joint account holder.
D. Undue influence
If it is clear that no gift was intended and the proceeds of the joint account revert on a resulting trust to the estate of the original account owner, then the question of undue influence does not arise.
Where, however, it is proved that a gift was intended, then the further question may arise as to whether the original account owner was induced by undue influence into making the gift. The presumption of undue influence may arise where:
- One party reposes trust and confidence in the other or is somehow vulnerable to influence, and
- The transaction in question calls for an explanation.
The parties therefore do not need to be in any special relationship, and the transaction does not have to be of ‘manifest disadvantage’ to the donor. Once a presumption of undue influence has arisen, it then becomes a matter for the donee to rebut the presumption and to show that the donor entered into the transaction with full knowledge of the advantages and disadvantages – and this will generally turn on whether the donor has had comprehensive and independent legal advice about all aspects of the transaction. 9
In the alternative, whether or not undue influence is established, the issue of the improvidence of the transaction may arise, in which case the transaction may be set aside on the grounds of its improvidence.
- These guidelines are limited to joint bank accounts that are personal property. They are not intended to deal with issues that may arise where real property is owned jointly, either by way of a joint tenancy – where the right of survivorship applies – or on a tenancy in common, where the right of survivorship does not apply.
- Sillet v Meek  EWHC 1169 Ch.
- See Lynch v Burke  1IR HC at p6.
- Lynch v Burke  2IR 159.
- The presumption of advancement is now viewed as somewhat anachronistic and some query whether it contravenes the European Convention on Human Rights.
- In the case of equitable fraud, someone who assists another in committing a fraud may be liable as a constructive trustee for dishonest assistance in the breach of trust or fiduciary duty (“Finance and law for the older client”, Tolley’s/STEP, issue 31, June 2008, at H1.8).
- See question 8 of form CA24 (2003 edition).
- Liability for dishonest assistance can arise not only for individuals but also for undertakings that facilitate a dishonest scheme.
- See “Finance and law for the older client”, Tolley’s/Society of Trust and Estate Practitioners, issue 31 at A5.41. See also Carroll v Carroll  4 IR. This latter case also raises the question of the ‘improvidence of the transaction’.