Joint Bank Accounts:
Are Your Accounts Properly Titled?
Many of my clients are familiar with the effect of holding bank accounts “jointly.” They understand upon the death of one joint-owner the bank account is owned by the survivor. Recall, this is a Non-Probate Transfer discussed in Introduction to California Probate – Part One, and commonly referred to as a “Right of Survivorship.”
However, oftentimes there’s confusion between titling an account jointly and merely adding an authorized user to the account for the sake of convenience. For example, I routinely consult with elderly clients who have added a child to their checking account for help paying bills. They’re shocked to learn that the child isn’t just authorized to sign checks, but legally owns half of the account and upon their death will own 100%. This causes discord in the family dynamic and routinely creates a hotly litigated issue, one that California courts have long grappled with: “When an elderly person with a joint bank account dies, does the account belong to the decedent’s estate or does it belong to the additional signer as a co-owner?”
History of Joint Tenancy Law re Joint Accounts
The first California law concerning joint tenancies in property was Civil Code §683, enacted in 1872, amended in 1935, and 1990. Presently, the controlling law is Probate Code §5100, et seq., also known as the California Multiple-Party Accounts Law (“CAMPAL”).
According to CAMPAL, a “Joint Account” is one that’s payable to any joint owner. Checking accounts, savings accounts, and certificates of deposit all fall within that definition. Pursuant to Probate Code §5302, unless there’s clear and convincing evidence to the contrary, the Joint Account balance belongs to the surviving party.
Litigation re Joint Accounts: Intent…
In hundreds of reported cases, families and friends have litigated this issue. Courts have had to decide what the bank depositor’s intent was when they opened the joint account, or when an additional signer was added to an existing bank account. On one side the heirs and beneficiaries argue: the balance belongs to the Estate— and the decedent only added a signer for convenience in managing their affairs. On the other side the co-owner claims a right of survivorship– and that no funds belong to the Estate. Sometimes there is a lot of money to fight over. Sometimes there is a little. Regardless of the account balance, a joint account can be a catalyst to lengthy and expensive litigation in the Probate court.
The most common rule applied is absent clear and convincing evidence to the contrary, the joint account balance belongs to the survivor. A legal presumption is created by titling an account jointly, and to paraphrase a recent holding by the California Court of Appeal’s Second Appellate District in the Estate of O’Connor, 16 Cal. App. 5th 159, that’s a tough presumption to overcome. “Clear and convincing” evidence has been described for well over 100 years by the Courts as being so clear as to leave no substantial doubt. This is a much higher burden to meet than a mere preponderance of the evidence.
In order to overcome the presumption, a Court will examine any admissible evidence with probative value. One reliable way to prevent litigation over joint bank accounts is Memorializing Intent. Statements of intention can be included in a will or trust. Strong, clear and concise statements of intent are given considerable weight by trial Courts. These statements can sometimes even deter potential litigation. However, the issue of intent will be applied at the time the account was opened and it cannot be changed later.
Proper Trust Funding can prevent litigation over joint bank accounts. For example, I advise all of my clients to fund their deposit accounts (accountings holding ‘after tax’ dollars) in the name of their Trust. By doing so, their successor Trustee or a co-Trustee can conveniently pay bills on their behalf and there’s no need to add a co-signer or co-owner to the account.
Another planning method to prevent litigation over joint bank accounts is using a well drafted Durable Power of Attorney. This instrument often times can be the most valuable tool in one’s estate planning portfolio. It allows another person to access your accounts and to pay bills on your behalf, among other things. This method, like proper Trust funding, doesn’t require any re-titling whatsoever.
Litigation can easily be prevented by a thorough review of one’s assets, and by consulting with a competent Estate Planning Attorney. If you have already consulted an Attorney— check their work:
- Did they obtain and review the titling of your accounts?
- Did they provide you with instructions for re-titling assets properly in your Trust?
- Have you updated beneficiary designations on your accounts?
- Do you also have a Durable Power of Attorney?
These questions are all part of the BPE Law Group’s Estate Planning Consultation. We have two office conveniently located in Sun City Lincoln Hills, and Gold River.