Managing Your Joint Bank Accounts

Joint Bank Accounts – What happens if one account holder deceases?

Orhai Shiba

Joint bank accounts are convenient. They allow couples to budget and manage their finances. But have you considered what happens to the account if one of the account holders dies? Do you read the bank’s terms and conditions or do you just skip to the last page and sign?

If you're someone who usually skips to the end of the contract, you may be surprised to learn that you operate the account as joint tenants. What this is means is that if one of you dies, the account balance passes to the surviving joint account holder. This is known as the principle of survivorship. It will generally override inconsistent terms in the deceased's will.

What do you do if you do not want the funds to pass to the joint account holder?

If you do not wish for the remaining account balance to pass to the second account holder, you will need to sever the joint tenancy.

When deciding whether joint tenancy has been severed, the courts will look at the intention of the parties, that is, whether they intended to sever the joint tenancy. Generally, if the parties have opened a joint bank account, a presumption applies that the parties intended to operate the account as joint tenants. This can be rebutted with contrary evidence, including mutual wills, informal understandings and oral agreements between the parties.

In McNamee v Martin as Financial Manager for John Boden McNamee [2021] NSWSC 568, Justice Sacker of the Supreme Court of NSW held that joint tenancy may be severed by doing any one of the following:

1. Unilateral action;

This could be by way of alienation to a third party of the joint tenant's interests, alienation to self or declaration of trust.

2. Mutual agreement between the joint tenants; or

In Re the Will of Fernando Masci [2014] QSC 281, the Court held that “it is not the making of a will, per se, or even the making of two wills, per se, which severs the joint tenancy, it is the agreement between the joint tenants to dispose of their property in a way which is inconsistent with the continued existence of a joint tenancy.”

In Gambacorta v Di Giovanni (No 2) [2021] NSWSC 803, the court held that by reason of an oral agreement between the parties, the joint tenancy was severed.

3. A course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common.

In Scott v Scott (1963) 109 CLR 649, the courts held that the treatment of joint assets by a husband and wife as if they were separate was conduct sufficient to sever joint tenancy.

If you have any jointly held assets, be it a bank account, property or other investment and you don’t intend to operate it as joint tenants, consider reaching agreement with your joint holder and if necessary, speak to Maclarens Lawyers to help you finalise your affairs.