Why joint bank accounts can cause problems in the event of the loss of mental capacity

Joint bank accounts can be problematic if one of the named account holders loses mental capacity. Browell Smith & Co explains the issues, and why they should never be seen as a replacement for a Lasting Power of Attorney.

A joint back account might seem like a simple and convenient way of sharing responsibility for someone’s finances, in preparation for the loss of mental capacity.

In fact, it’s a route that a lot of people take: entrusting a spouse, child or close friend to manage their finances by simply giving them joint control of a bank account.

However, while it might be simple in the short term, the ‘joint account’ approach can cause a lot of difficulties in the long-term, if someone loses mental capacity. The joint account should never be used to replace a Lasting Power of Attorney.

Banks can freeze accounts

Guidance from the British Bankers’ Association states that banks can use their discretion to determine whether or not to temporarily ‘freeze’ the joint bank account so as to prevent any withdrawals from the account in the event that one of the account holders becomes mentally incapable.

This is because the premise/purpose of a joint account is that both people give consent for the assets in that account to be withdrawn if required. If one of the account holders lacks capacity to give that consent, then the account could be frozen.

It’s worth noting that ‘standard’ withdrawals such as direct debits and standing orders will normally be able to continue as these would have been arranged when both account holders could give their consent.

Trust issues

We’re not suggesting that you shouldn’t trust those who are closest to you. However, we must make it clear that bank accounts are not regulated in the same way that an LPA is. This means that someone with access to a bank account will have largely uncontrolled access to the assets kept there.

The property and money that you have spent a lifetime building up should be used to make sure you are looked after in the event that you lose mental capacity. If you are relying on a bank account to do that, then there is no legal basis to ensure that happens.

What’s the solution?

The solution is to speak to a lawyer and seek an LPA that will enable you to make financial and property decisions on behalf of the person with reduced capacity. This will need to be drafted, signed and registered with the Office of the Public Guardian.

We talk about LPAs in more detail here and strongly recommend that people act early to put any relevant LPAs in place before anybody involved loses capacity.

Browell Smith & Co has a team of friendly and approachable experts who can help you through every step of arranging a Lasting Power of Attorney for somebody, whether or not they have lost mental capacity. You can read more about our range of wills and elderly client services here.

Contact our expert team today to arrange an appointment in Newcastle, Cramlington, Ashington and Sunderland, or alternatively by calling 0800 107 3417, to discuss your particular requirements.