The extent of the share (Scotland): joint money accounts and special destination
Under Scots Law where Bank or Building Society Accounts are held in joint names and the survivor the special (or survivorship) destination (IHTM15050) does not by itself pass the ownership of the money in the account to the survivor.
An account with a Bank or Building Society is not a document of title as it is not a Deed of Trust in terms of the Bank Bonds and Trusts Act 1696. It is a contract between the Bank and the customer which regulates the conditions on which the account is to be operated and is for administrative convenience only. See for example Cairns v Davidson 1913 SC 1054.
For this reason the ownership of the funds in the account is determined according to the ordinary principles of ownership. The owner of the funds in the account remains the owner unless and until some transfer of ownership occurs.
James and Lucy (who are married) open an account, governed by Scots law, in their joint names and the survivor. James has provided all he funds. James dies and is survived by his wife, Lucy. On his death:
- In the absence of any act of transfer of ownership to Lucy (for example, a separate Deed of Gift) the whole account should be included in the IHT400.
- If the account passes to (say) the children under the terms of James’ Will then the asset will be chargeable to Inheritance Tax
- If the account passes to Lucy under the terms of the will (IHTM11032) then exemption under IHTA84/S18 will apply/
This applies to all Bank/Building Society accounts governed by Scots Law. So it will apply to taxpayers living in England, Wales and Northern Ireland who have an account which is governed by Scots Law.