Suppose your aging mother asks your sister to take care of her finances and help her to balance her checkbook. You live out of town, and think it’s a great idea. To make things easier, your mother adds your sister as a joint owner of her bank account. When your mother dies, her Will leaves everything 50/50 to you and your sister. There is no mention of the bank account in the Will, and you assume that the bank account will also be divided equally between you. Until your sister tells you that as surviving joint owner, all the money in the bank account belongs to her. You think that can’t possibly be right, because your mother obviously intended for everything to be equally split, and you speak with an attorney. What will she tell you? Your sister keeps the money.
1) What are joint accounts?
Joint accounts are an increasingly popular tool that many people use to ensure that upon their death, their assets go to the people they choose, simply and quickly. These “multi-party accounts” with joint owners, whether they be bank accounts, certificates of deposit or other shared accounts, are termed “non-probate assets.” Rather than being subject to the probate process, multi-party accounts are distributed per the terms of the account, so when one owner dies, the account is then automatically owned by the survivor. People favor joint accounts because they can be relatively simple to establish and the assets can be accessed more quickly at death than assets that go through probate. The problem arises when a joint owner is added for convenience and as an aid to financial management, but the original owner doesn’t necessarily intend for the joint owner to take over the account at death.
2) Why the controversy?
Patrick Butler was survived by three children and four stepchildren when he died in 2008. Mr. Butler had a Will, which left his “entire estate in equal shares” to his children and stepchildren. So far, so simple. Except not really. Butler also had a number of Certificates of Deposit, which he owned jointly with one of his daughters, Maureen Kissack. These CDs amounted to around $100,000. Unsurprisingly, the other children thought that these CDs should be distributed as per Butler’s Will, with each child getting an equal amount. Kissack disagreed, and argued that as she was the joint owner named on the CDs, all of the money was hers to keep. And so the battle commenced.
Minnesota law provides a presumption that assets held in a joint account belong to the surviving account holder unless “there is clear and convincing evidence” of a different intent, or if “there is a different disposition made by a valid Will…specifically referring to such account.” This was the crux of the argument. Kissack’s siblings and step-siblings provided evidence that Butler always intended that his estate be divided equally between the siblings, and that Butler would not have intended that Kissack get preferential treatment. However, they did not present any evidence that specifically mentioned the CDs in question, and Butler’s Will did not refer to the CDs.
After numerous rounds of legal argument the Minnesota Supreme Court clarified a bright-line rule: The joint owner of a multi-party account will take ownership of the account upon the death of the first owner – unless the deceased makes specific mention of the joint account in his Will or there is other evidence of the deceased’s intent that makes specific mention of the joint account. Kissack kept the CDs.
3) What does this mean for clients?
Many people, particularly older ones, add relatives or friends to their accounts to assist in handling their financial accounts. People tend to want only signing authority to be given to these family members or friends, but often the financial institution will mistakenly add the second person as a joint owner, rather than merely an additional signatory. This means that when the first owner dies, the surviving owner will own any money contained in the joint account . Only if the first owner’s Will specifically refers to the account in question, or other evidence is found that refers specifically to the account, will the account be distributed per the terms of the Will.
To ensure that the terms of your Will are followed, you need to ensure that any joint accounts are specifically mentioned in the Will – literally language along the lines of, “The account held jointly with my daughter for the purposes of financial management at Bank ABC is to be distributed as part of the residue of my estate.” Although the Supreme Court also stated that courts should consider other “clear and convincing evidence” that specifically refers to the joint accounts, why take the risk that the evidence is not considered clear enough? A multi-party account trumps a Will – unless there is specific evidence to the contrary. So if you have a joint account with someone, but you do not want that person to own the account upon your death, either go back to the bank and ensure that the person has only signing authority but not joint ownership, or mention the accounts in your Will.
Photo: thinkpanama
