Q: I’ve a question about our joint account and power of attorney. Why go to the bother of joint bank accounts and lasting power of attorney? My husband and I have a joint bank account. If either of us became incapable, then the other person would continue running the account.
A: Firstly, the bank account, joint or sole, is not the only thing the lasting power of attorney covers.
You have the car, the house and the utilities. Even the milkman and the window cleaner The list is not unlike love, endless.
If you somehow, by some manner of magic unproblemed the bank account, you’d still have all these other matters to deal with – DVLA, council tax and all the rest of it.
The bank doesn’t care which of you runs the joint account. The bank cares that you conduct and manage the account within the terms of the prevailing contract, The bank cares that its fees are paid, the bank cares that you remain profitable customers, and the bank cares that overdrafts and loans can be redeemed.
Joint Account and Power of Attorney: How Accounts Work
Each party to a joint account always gives the other consent to run the account. The consent is implied. You’d be in the jargon, acting jointly and severally. There is a chance that if you read the terms of business that governs your account, you’ll find there’s some wording to the effect of the bank’s ability to close the account should one person lose the ability to manage the account.
Each of the account holders perpetually promises the bank to be responsible for the other person’s running of the account. Either party can therefore withdraw permission at any time.
So far, so ordinary.
Joint Account and Power of Attorney: Loss of Mental Capacity
Imagine, if one of you lost his or her mental capacity. How would that person consent to the other person’s conduct of the account? How, by implication could the incapacitated person withdraw consent.
When one of the account holders loses mental capacity, the other party continuing to run the account as if nothing had happened would be in breach of the contract with the bank. We’d call it fraud if we wanted to be bone-headed about it.
Joint Account and Power of Attorney: Ability to say ‘No’
It’s the sort of thing on which my mother instructed me in matters of sex. The other party has, and must always have the ability to say ‘no’ at every point of the relationship. Drunkenness, or any act or state that causes the other party to lose the ability to say ‘no’ is no excuse, is no reason to assume consent.
The point is the other party must be able to withdraw consent. Just like the joint account and power of attorney, the other party must be able to say ‘no’.
Joint Account and Power of Attorney: They’d Freeze the Account
If one of you lost their mental capacity, then, the bank would freeze the account.
‘if one joint account holder loses mental capacity, banks and building societies can decide whether or not to temporarily restrict the use of the account to essential transactions only (for example, living expenses and medical or residential-care bills) until a power of attorney is registered.’British Bankers’ Association
As you see from the BBA’s statement, even with a joint account and power of attorney go tother like a horse and carriage.
And, at such a crucial point in your family’s financial life, you’re too sensible to want to leave such things to the discretion of a bank clerk.
Even with a joint bank account, you’d still need lasting powers of attorney, that’s why I’d go to the bother, and, that’s why you should too.
Ade Oduyemi helps ensure your wealth is transferred down the generations. His mission is to ensure a generation or two hence, your new money becomes old money. He’s an inheritance planner. You can get a free copy of his latest book, Maximum Inheritance here.