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Katya Sverdlov Blog

Tuesday, April 14, 2015

Why the Money in a Joint Account May Not Be Distributed to the Survivor (or how uneducated plans go wrong)

Many people think that if they put their money in a joint account, the survivor will automatically inherit the funds and no further claims can be laid on that money. Unfortunately, as the survivors often discover to their great chagrin, it often does not work like this easily. The other heirs, including spouses and legatees under the will, as well as the IRS and other creditors of the estate, may all have higher priority claims to these funds.

Presumption: In general, if there is ‘survivorship language’ included in the joint bank account signature card, there is a presumption that the money should go to the surviving party upon the death of the first account holder. However, this presumption can easily be rebutted with direct proof that no joint tenancy was intended, or circumstantial proof that joint account had been opened for convenience only. If the court will determine that the account was for convenience purpose only, then the funds in the account will belong to the estate and may be used to first satisfy the estate’s debts and other bequests.

Testator’s Behavior: When determining the purpose for which the account was opened, the court will first examine the decedent’s behavior in regards to this account. The court will look at the testamentary plan – did the Will give the money to the joint account holder alone or did the testator provide for other people?  If the only remaining money is in the joint account, and there are explicit gifts given to other people, the court may infer that the account was joint only for convenience purposes. In that case, the funds are likely to be given back to the estate to satisfy the other bequests.

The court will also examine the signature requirement – whether or not both signatures were required in order to withdraw money. If both signatures were required, the court is likely to conclude that the account was for convenience purpose only. Similarly, the court will inquire about who had the control of the checks during the decedent’s lifetime. Full control of the withdrawals by the decedent will likely mean that the account was joint for convenience purposes only and the money should belong to the estate.

Survivor’s behavior: The court will also look at the behavior of the surviving account holder during the life of the decedent. The court will inquire whether or not the survivor ever withdrew from or deposited money into the account. The court will also inquire whether or not the survivor knew about the decedent’s testamentary plan. Lack of access to the funds or lack of knowledge about the plan will likely mean that the funds will be brought back into the estate.

Summary:  As you can see, placing money in a joint account is not an easy panacea that people often hope it will be. When creating a testamentary plan, it helps to talk to an attorney, to determine whether the distribution of your funds will be what you intend it to be.

 

Disclaimer: This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship.


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