If you share a bank account in California with another person who has died or whose health may be failing, you may assume that your will or financial records indicating who funded the account will dictate how the bank account is distributed. Although that may happen under certain circumstances, that is not the default result. What happens to the account will depend upon what type of bank account was established. Once one account holder dies, the other account holder may not be able to change the type of joint account, so it is best to understand and plan for how such a joint bank account should be handled before one account holder dies.
Joint Bank Account with Right of Survivorship
A “right of survivorship” by definition means that a certain property is owned by two or more parties, and, upon the death of one joint owner, that the property will automatically pass to the remaining owners outside of any probate process. We see this in real estate, but it is also true in banking.
Thus if a bank account was originally established with a “right of survivorship,” the surviving bank account owner(s) is granted the entire account. This right supersedes any will, and avoids probate for that specific account. You may be required to show the bank the death certificate. You then continue to own and have control over all funds in the account, or continue to share it with other named co-owners. However, a lawsuit judgement against a deceased owner may still leave that account subject to the claims of creditors.
A joint bank account in which more than one party has the ability sign checks and withdraw money from the account is generally going to include a right of survivorship, unless some agreement or documentation indicates otherwise. Thus, if a man and his daughter have a joint bank account, funded completely by the man, and the man dies, then the bank account will transfer automatically to sole ownership by the daughter, even if the daughter was not named in the man’s will.
The Danger of Convenience Accounts
It is common for a person to add another person’s name to a personal bank account for the purposes of convenience and not because the other person is considered a joint owner of the account. This can include personal assistants, secretaries, home support staff, and even family members such as children. Because joint bank accounts generally transfer automatically upon one holder’s death, the danger is that a court will transfer the entire account to the other person on the account when that person was merely listed for convenience’s sake, and the holder intended the money to be included in his or her estate and passed on to the beneficiaries named in his or her will.
Joint Bank Accounts and Gift Taxes
If the purpose of a joint bank account is to avoid the added time of probate, this should be done well in advance of an expected death. If this is not possible, then the other owners face a gift tax on the value of the account over $12,000. Note that if the surviving joint account owner did not make any contributions to that account, there may be a presumption that the account was in fact, a gift. It will require the presentation of clear and compelling proof to the contrary. This proof may include evidence of other material contributions outside the account.
Confused Or Need Help With Joint Account and Probate Problems? We Can Help.
Christopher B. Johnson, Attorney at Law, is experienced in all aspects of probate law, as well as the legal complexities that frequently arise in the estate of a recently deceased family member, loved one or partner.
During our consultation with you we will establish:
- The exact nature of the joint account you shared with the deceased.
- If there are any probate legal issues that need resolution.
- Any proactive declarations or verifications that must be filed with the court to clearly establish your right of ownership, and avoid unnecessary procedures, costs, and other issues hindering your access to the account.
To request a consultation, contact Christopher today at (877) 755-9178.