by Francis Burton Doyle, Esq., WealthPLAN
Many seniors reach a point in their lives when they wish to enlist the help of their children or friends in managing their financial affairs. In many instances, this help includes assistance with the paying of their bills. Often a joint tenancy bank account is established between the senior and the person helping them with the task of paying bills. During lifetime of the senior, the joint tenancy account works as designed with the third party, typically a child, being able to write checks, transfer funds, and facilitate automatic bill payments on the account, etc.
Bank personnel prefer this joint tenancy account approach to other alternatives such as having the person operate under the auspices of a power of attorney or revocable trust. This is because the power of attorney and/or the revocable trust approaches require local branch personnel to enlist the aid of their legal departments in order to ascertain a third person’s authority under the terms of a legal document. This often results in delay and client dissatisfaction.
Upon the senior’s death, however, these types of joint tenancy accounts can result in confusion and serious inter-family squabbling. Under the law of most states, at the death of the senior the balance remaining in the joint tenancy account passes to the surviving joint tenant without regard to senior’s will or trust. An exception to this general rule exists where there is “clear and convincing evidence” of a different intent.
For example, a mother with two daughters has a will that leaves her “estate” equally to both of them. As she approaches the age of 90, she enlists the help of one daughter in paying her bills and establishes a joint tenancy account with that daughter. Upon the mother’s death, under the general rule, the balance in the joint tenancy account passes to the daughter on the account because the account is not technically part of the mother’s estate.
If the daughter on the account takes the position that the balance in the joint tenancy account belongs to her because of the joint tenancy, her sister may take issue with that position because she believes her mother’s intent was to leave all her property (whether or not in a joint tenancy account) equally between them. Unless the other daughter has “clear and convincing evidence” such as some written document specifically indicating that the joint tenancy account was to be divided between the two daughters as part of her estate, the sister on the joint account will prevail.
Call-to-Action~ Take Away of Today’s Article… The take away from this story for estate planners is threefold:
(1) Be sure to check the titling of all client bank and other financial accounts and other assets as part of constructing a client’s estate plan;
(2) Explain to the client the consequences of establishing joint tenancy accounts with third parties and carefully document in a writing signed by the client the client’s intent as to the post mortem disposition of the account; and
(3) Work with clients to facilitate the use of other bill management systems such as the effective use of durable powers of attorney and revocable trusts. While such alternatives require more initial bureaucratic work than establishing a joint tenancy account, the effective use of a durable power of attorney or revocable trust to assist seniors in managing their financial affairs will often save significant expenses in the post mortem settlement of the client’s estate as well as avoid family angst (and potential litigation) over the disposition of the client’s estate.
About the Author:
Francis Burton Doyle, Esq., is the founder of WealthPLAN, with over 30 years of experience in Tax, Estate-Planning Probate, Trust Administration and Litigation. He is Certified Legal Specialist in Taxation Law and Probate, Estate Planning and Trust Law (California State Bar). Frank is the Past President of both the Santa Clara County Estate Planning Council & the Silicon Valley Planned Giving Committee. Frank is also the Past Chair of the Annual Jerry A. Kasner Symposium, Planning Committee, Santa Clara University, School of Law. Mr. Doyle provides all the course development and instruction for the Advanced Legal Training Institute.
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