Gintax answers Sunday Independent readers’ questions on tax.
Article published on 1 December 2019

JOINT ACCOUNTS AND DEATH

Q My wife's aunt opened a deposit bank account with a lump sum of €100,000 some years ago with my wife and I also named on the account. My wife's aunt said at the time it would be handy if both our names were on the account because if she needed money and was unable to go to the bank, we could withdraw it for her.

She also told us that if the money was not spent when she passed away, it would be ours. We have queried in the bank if this is the case and were told that all three of us have the same access to the account at any time - and that if my aunt-in-law passed on before us, the money would be ours.

We do not know what she has specified in her will, but wonder would the €100,000 in this account be considered an inheritance and, if so, would we have to pay tax on it - or could she leave it to someone else altogether even though our names are on the account? If it is considered an inheritance and we would have to pay tax on it as a result, is there anything that could be done now to limit the inheritance tax bill we would face? Roger, Co Kildare

The general principal of joint ownership is that the property goes to the surviving party automatically on the death of the other owner. However, in relation to bank accounts, this may be changed by showing the person creating the account did so for convenience only - and did not intend it to pass to the survivors on his or her death.

The intention of your wife's aunt appears to be that the money remains hers until her death - and then goes to you and your wife equally. While the confirmation of the bank is helpful, these matters can become fraught if someone contests the position and the bank documents somehow do not reflect the position as you understand it. It would clear things up beyond doubt if the will also bequeathed these proceeds to you both.

The receipt by each of you will be a taxable inheritance, subject to Capital Acquisitions Tax (CAT) and any amounts above the lifetime thresholds - that is, the amounts you can inherit tax-free - are subject to tax at 33pc. Your wife, as a niece, will have a lifetime threshold of €32,500 and you will have a threshold of €16,250 as you are a stranger for tax purposes.

If the aunt is still alive, then to the extent that you both withdraw money each year for your own personal use, rather than funding your aunt's living costs, then this receipt would be regarded as a gift from her. This money is still technically within the scope of CAT but an individual can receive a benefit of up to €3,000 value per year tax-free from any person.

So, for example, you could each be given €3,000 per year from the account without triggering any tax bill - assuming the aunt is not making any other annual gifts to either of you. This would clearly reduce the value of the account, which in turn reduces any taxable inheritance on death. The lifetime thresholds noted above would not be impacted by this. This will be a matter for your aunt as she may well need the money for her old age.