One rather straightforward arrow in the wealth transfer quiver is the multi-party joint deposit account. Typically arranged through a financial institution, these accounts offer flexibility in that they grant various ownership rights to multiple parties, with a minimum of paperwork. Alas, the utter simplicity of these accounts can sometimes cause difficulties.
In Texas, the general rule is that all accounts are presumed to be non-survivorship accounts. The person claiming that the account is a survivorship account has the burden of proving it. While there are a number of variations, joint deposit accounts usually fall into one of three categories.
These accounts are established for the convenience of the primary account. For example, an elderly person may provide access to an account to another, who assists in the payment of monthly bills and other basic living expenses. Here, the purpose of the account isn’t so much to pass assets to another at some point in the future, but rather to utilize those assets in the current time frame. At the death of the primary account holder, the funds in the account pass through that person’s will or probate estate, not to the other owner or owners.
These accounts include two or more equal owners. When one of the joint owners dies, his or her share passes through his will or probate estate, and not to the owner account holders.
There are two types of joint accounts: One is with survivorship rights and one is without survivorship rights. With the former, at the death of one account holder, the funds in the account pass directly to the survivor, without going through the probate estate. With the latter, the deceased’s share passes through his or her will or probate estate, much in the same fashion as the tenant in common account.
Generally, a court looks at the original documentation to make a determination as to the type of joint account. Most often, the account documents consist of a pre-printed card or page, with various boxes that can be checked. Where the initial intent is clear, there is little difficulty in determining what sort of account the parties created.
The account creation process is, however, often fraught with error. For example, if the form is signed, but no boxes are checked, the account has no survivorship rights. The same is true if the boxes are checked in an inconsistent manner or if boxes are checked at a later moment by someone who has no ownership interest in the account (e.g., someone at the bank). In any of these situations, the assets pass through the decedent’s will or probate estate.
When the accounts are properly created, they can be quite useful, either in allowing for the payment of expenses via a convenience account or in passing wealth to other family members without it being considered part of the probate estate. In some families, joint accounts can also be very substantial; they can be the primary asset of the estate. Where care is not taken with their creation, these accounts can spawn contentious litigation. In many ways, challenging a joint account designation is very similar to contesting a will.
The attorneys at Romano & Sumner have more than 20 years of combined experience providing expert legal assistance to clients in all types of wealth management and estate planning. At Romano & Sumner, we never use a cookie cutter approach. We understand multi-party joint accounts and can advise on how they may or may not work in your unique situation. We listen to you and offer multiple alternatives that will help you maneuver through the complicated tax and legal arena. We pride ourselves upon our professionalism and client service. We keep our clients informed, returning your calls within 24 hours. We’re ready to assist you as you make the important decisions that affect your family. Call us at 281-242-0995 or complete our online contact form.
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