Brochure

Establishing a Joint Bank Account with a Child May Ruin Your Estate Plan—and Your Family

Posted on: October 20th, 2017 by

 

The recent New York case of In Re Asch provides a cautionary tale of an all-too common problem that often destroys a family. Mrs. Asch had signed a will that, as with most parents, left her probate assets equally between her children, in this case her two daughters.

The key term in the prior sentence is “probate estate,” which pertains to those assets owned solely by the deceased person (“decedent”) at the time of her death. Before her death, Mrs. Asch had added one of her daughters (we’ll call her “Sallie”) as a joint tenant with rights of survivorship of Mrs. Asch’s bank account, which apparently contained a significant sum of money. By operation of law, upon Mrs. Asch’s death, Sallie became the sole owner of that bank account as the surviving joint tenant.

Mrs. Asch’s other daughter (“Jane”), convinced that it was her mother’s intent that the entire estate was to be equally divided between Jane and Sallie as memorialized in Mrs. Asch’s will, was none too pleased that Sallie ended up with a significantly larger share of their mother’s estate. Jane hired an attorney and commenced a “discovery proceeding” against Sallie as part of the probate process, seeking to prove that either (i) her mother did not have the requisite mental capacity to create a joint bank account with Sallie, or (ii) that Mrs. Asch intended for the account to be a “convenience” account, which would cause the account to be a probate asset and thus disposed of under the terms of the will, and was not a true joint account with rights of survivorship.

The Richmond County Surrogate’s Court determined that the survivorship language on the account triggered the statutory presumption that the account was a survivorship account. The burden shifted to Jane to prove that Mrs. Asch intended the account to be a true convenience account. Although Jane proved that her mother was the sole depositor of funds into the account and that the funds in the account were, with just a few exceptions, used solely by Mrs. Asch, the court determined that Jane had failed to provide documentary evidence or testimony from any person with first-hand knowledge on the circumstances surrounding the creation of the account. For those reasons, the court ruled that Jane had not met her burden of proof.

On the mental capacity claim, the court determined that the medical evidence submitted by both daughters raised a question of fact as to their mother’s mental capacity when the account was established. The court therefore denied each daughter’s motion for summary judgment, allowing the case to continue through discovery and possible trial on that issue.

The Asch case highlights an all-too common scenario where an elderly parent establishes one or more joint bank accounts with a child while excluding the other children, and the parent does not understand that doing so will undermine their estate plan. In my experience these joint accounts are established, often under the guidance of a well-meaning bank employee, simply to allow the child—who often lives nearest to the parent—to help the parent pay bills and otherwise manage their finances. But the parent could receive the same assistance from their child by simply designating the child as an agent under a durable power of attorney without the risk of “upsetting the apple cart” caused by a joint ownership arrangement. Banks, however, are often concerned that the bank would have increased liability in dealing with an agent under a power of attorney rather than an owner under a joint account. As shown in Asch, however, what may be in the financial institution’s best interest may well adversely affect the customer’s interests, often with catastrophic and far-reaching consequences.

Richard J. Shapiro is a partner with the Hudson Valley law firm of Blustein, Shapiro, Rich & Barone, LLP. He is the author of the 2017 book Secure Your Legacy: Estate Planning and Elder Law for Today’s American Family published by Archway Publishing. Mr. Shapiro, who is “AV” rated by Martindale-Hubbell and named a “Super Lawyer” in Estate Planning and Probate law, is a member of WealthCounsel, ElderCounsel, the National Academy of Elder Law Attorneys, the New York State Bar Association (Trusts and Estates and Elder Law Sections), and the Hudson Valley Estate Planning Council. You can reach him at (845) 291-0011 or at rshapiro@mid-hudsonlaw.com. The information in this article is for general information only and is not, nor is it intended to be, legal advice.

©Copyright 2017, Blustein, Shapiro, Rich & Barone, LLP.