One common source of controversy in end-of-life planning and estate and trust administration is the existence of a financial account owned jointly by the decedent/contributor and another person who is not the sole heir of the decedent's estate. As I discussed in a previous post, the key features of most joint accounts is that any party to the account may unilaterally withdraw the funds in their entirety and the surviving joint account holder will automatically be entitled to retain the remaining amounts in the account upon the death of the other owner. The last will or trust agreement of the decedent would have no impact on this result.
After the death of the owner of the contributor of the funds, the other heirs of the estate may attempt to recoup funds that automatically passed by operation of law by the surviving joint owner. However, this is a difficult and expensive process because the funds will no longer be in the name of the contributor, and the law exonerates the bank if it pays out the funds to the surviving joint owner. In litigation to recover the funds from the surviving joint owner, the court will presume that all aspects of the joint account arrangement are valid and the other heirs will need to overcome this presumption by clear and convincing evidence.
Theories for overcoming the presumption that ownership passes to the surviving joint owner include fraud, mistake, incapacity, or other infirmity. Another theory for overcoming the survivorship presumption on a joint account is that the account was intended as a mere "convenience account," or an account established to assist with handling money and affairs but with no intent to pass ownership of the remaining funds.
Factors that could potentially suggest the existence of a convenience account include the decedent being the sole source of the funds and retaining possession of checkbooks, debit cards, etc.; the failure of the surviving joint owner to assert ownership during the lifetime of the contributor; or the acknowledgment of the non-contributor of the intent to use the funds to provide for the contributor's needs. However, factors that suggest that the account was not set up jointly solely for convenience, but rather with intent to pass ownership, include the account balance being far in excess of what the contributor needed, the contributor relinquishing possession of checkbook, or the non-contributor asserting ownership during lifetime. See McCullough v. Wasserback, 518 P.2d 691 (1974).
In order to avoid disputes, individuals should carefully consider all of the legal implications of creating a new joint account or adding a family member to an existing account as a joint owner. If the account is intended to be a mere convenience account, it should be documented as such along with the contributor's other estate planning documents.
After the death of the owner of the contributor of the funds, the other heirs of the estate may attempt to recoup funds that automatically passed by operation of law by the surviving joint owner. However, this is a difficult and expensive process because the funds will no longer be in the name of the contributor, and the law exonerates the bank if it pays out the funds to the surviving joint owner. In litigation to recover the funds from the surviving joint owner, the court will presume that all aspects of the joint account arrangement are valid and the other heirs will need to overcome this presumption by clear and convincing evidence.
Theories for overcoming the presumption that ownership passes to the surviving joint owner include fraud, mistake, incapacity, or other infirmity. Another theory for overcoming the survivorship presumption on a joint account is that the account was intended as a mere "convenience account," or an account established to assist with handling money and affairs but with no intent to pass ownership of the remaining funds.
Factors that could potentially suggest the existence of a convenience account include the decedent being the sole source of the funds and retaining possession of checkbooks, debit cards, etc.; the failure of the surviving joint owner to assert ownership during the lifetime of the contributor; or the acknowledgment of the non-contributor of the intent to use the funds to provide for the contributor's needs. However, factors that suggest that the account was not set up jointly solely for convenience, but rather with intent to pass ownership, include the account balance being far in excess of what the contributor needed, the contributor relinquishing possession of checkbook, or the non-contributor asserting ownership during lifetime. See McCullough v. Wasserback, 518 P.2d 691 (1974).
In order to avoid disputes, individuals should carefully consider all of the legal implications of creating a new joint account or adding a family member to an existing account as a joint owner. If the account is intended to be a mere convenience account, it should be documented as such along with the contributor's other estate planning documents.