Several South African tax residents hold international bank and/or investment accounts, like the Nedbank Private Wealth International Focus Account, in joint names. It is important to understand the impact of joint accounts under the laws that apply in the countries where they are held, including in South Africa as country of tax residence.
 

The difference between joint and co-ownership

There are key differences between the concepts of joint- and co-ownership. Although they are often used interchangeably to refer to 2 or more persons holding 1 asset, they are quite different. Generally, the concept of joint ownership is used in the international context, while co-ownership is more commonly used in South Africa.

An international account in joint names is easy to administer after the death of 1 of the joint holders

As an example, when 2 or more people hold a joint Nedbank Private Wealth International Focus Account and 1 of them dies, the ‘right of survivorship’ is invoked in the relevant jurisdiction – that is, the United Kingdom, the Isle of Man or Jersey. The account must be transferred to the surviving joint holder(s) on receipt of a copy of the death certificate of the deceased joint holder, without the account being frozen or the need to obtain probate in the specific country – which could be a costly and lengthy exercise. 
 

In a joint account, both owners are entitled to 100%

From an ownership perspective, each joint accountholder is entitled to 100% of the account and therefore any of them may, during their lifetime, access or provide instructions relating to the account without the consent of the other joint accountholder(s) to a certain extent. However, joint ownership is generally not recognised or allowed in South Africa.

The most likely reason for this is that there is no legislation specifying what will happen to the asset if 1 of the joint accountholders dies or becomes insolvent, which can lead to conflicting demands from the surviving joint accountholder(s) and the executor of an estate, or a creditor. Accordingly, for South African legal and tax purposes, joint accountholders of an international account are regarded as co-owning the account, which means that each accountholder is regarded as owning an equal share in the account, not 100%. 

Co-ownership of an international account by South African tax residents may result in unforeseen tax consequences, illustrated by the following examples:

Example 1: Principal holder (husband) adds his spouse as a joint accountholder

Assume the international account includes cash and equities to the value of £300,000 and that the spouse has not made any contributions to the account. Also assume that they are married out of community of property, without accrual.

Example 2: Principal holder (father) adds his 3 children as joint accountholders

Assume the international account includes cash and equities to the value of $400,000 and that the children have not made any contributions to the account.

Example 3: Joint holders A and B who are siblings, each contributed 50% to their international account. Joint accountholder A decides to contribute a further £100,000 in cash.

Assume the international account, before the further contribution, included cash and equities to the value of £300,000.

Additional complexities could arise in these examples, both from a tax and administrative perspective, should a joint accountholder:

• withdraw more than their deemed share in the account during their lifetime;
• bequeath their deemed share in their last will and testament to a person other than the surviving joint accountholder(s);
• be married in community of property and the joint holder(s) is/are persons other than the spouse, considering that the spouse will have an equal share in the joint estate; or
• be married out of community of property with the application of the accrual system where the spouse may have a claim against the account, etc.

How to minimise tax-related complexities 

To mitigate tax-related hurdles and have certainty on who will be responsible for the associated taxes during their lifetimes and after death, you could retain evidence of the actual ownership split between the joint accountholders of the account, which is, for example, based on their respective contributions to the account. This should further be supported by a written agreement between the joint accountholders specifying the envisaged ownership split and/or accurately reflecting the contributions made together with other supporting documents like bank transfers. It is recommended that this evidence is retained in a safe place, accessible to the executor appointed in the will of a joint accountholder.
 

We would recommend getting professional advice before deciding to appoint persons as joint accountholders on international accounts

The following table summarises some of the advantages and disadvantages:

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