Question: If spouses (my brother and his wife) have a joint bank account, what happens to the assets in that account if one of them dies? Is this account separate from their respective Wills?
Loraine’s Answer: In Georgia, a joint bank account is normally treated as held by its owners as “joint tenants with rights of survivorship” unless the owners took steps to specifically designate the account as held by them as “tenants in common” (which does not have a right of survivorship attached to it). It is fairly unusual for a joint account to be set up as tenants in common, although it does happen. This means that, in most cases, a Georgia bank account that is owned by two individuals will automatically transfer to the surviving owner at the death of the first owner to die. In that case, the deceased account owner’s Will will have no effect on the assets in the joint account, and the deceased account owner’s estate will have no claim on those assets. If the surviving owner uses assets in the account to pay any expenses or debts on behalf of the deceased owner, such as funeral expenses, cremation fees, the purchase of a burial plot, or payments on an outstanding mortgage or loan, the surviving account owner can seek reimbursement for those payments from the deceased account owner’s estate, since the assets from the joint account are the surviving owner’s personal assets, and do not belong to the deceased owner’s estate.
In the unusual case where a joint account was set up as tenants in common, however, then a deceased account owner’s share of the account will become part of the owner’s probate estate at his or her death, and it will not pass automatically to the surviving owner. Determining the actual share that belongs to each owner may require tracing which owner put in what share of the assets in the account, as assets held in a joint account do not automatically become the equally held property of the account owners. But each owner’s separate share of the account’s assets can be controlled by his or her Will.
In some cases, a joint account that was not set up as tenants in common will still be deemed not to be held by its owners as joint tenants with rights of survivorship. In these cases, however, the account is deemed to have belonged solely to one of the owners, and not to have been a true joint account. A party who wishes to have a purportedly joint account treated as the sole property of only one of the listed owners must produce clear and convincing evidence (a relative high standard) that (1) the account was set up solely for the convenience of the person claimed to be the true sole owner (which generally means that the account was established only to allow the other listed owner to help the true owner pay bills and write checks); (2) only the purported true owner ever contributed any funds to that account; and (3) the purported true owner did not intend for the other listed owner to become the sole owner of the account at her death. This situation often comes up when a child who is helping an elderly parent manage her finances ends up added to the parent’s account as an owner by a bank employee, either because the parent does not have a valid power of attorney or because the bank for whatever reason simply prefers not to have to deal with having a power of attorney agent named on an account. For a third party to be able to prove the required evidence can be difficult, and if the surviving owner of the account is not in agreement that the account was not intended to be a true joint account, expensive litigation may be necessary.
Key Estate Planning Takeaway: Be careful and think before you set up a joint financial account of any kind (banking, securities, etc.). The way the account is set up will determine what happens at an account owner’s death, as well as what each owner can do with the account while both of them are still living. Setting up a standard joint account can end up causing assets to pass in an unintended manner, and setting a joint account up as tenants in common can create it own difficulties. You must be sure, before setting up a joint account, to understand how the way the account is held can impact your overall asset distribution desires and your intended beneficiaries. Then, you can decide whether using a joint account truly reflects your wishes and fits into your overall estate plan.
This “Q&A with Loraine” blog series features answers from Morgan + DiSalvo Partner Loraine DiSalvo to questions posted on www.avvo.com. A key takeaway from each exchange highlights an important facet of estate planning.
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