Is a joint bank account an Estate asset?

Posted by: Pierson W. Backes | Posted on: January 27th, 2013 | 0 Comments

I was speaking recently with an excellent estate planning attorney, discussing the matter of joint bank accounts. From the point of view of the estate planning lawyer, joint bank accounts looked like a viable tool in the estate planning toolkit. From my point of view, as an estate litigator, joint bank accounts are an invitation for trouble.

I’m speaking here of bank accounts that are joint in name alone, where one person has contributed all of the money and simply named another person as joint owner. This happens for a variety of reasons; sometimes it is a “convenience” account, set up to let another person pay bills or the like, and sometimes it is a round-about way of estate planning, made with the intention that the money in the account will pass to the survivor upon the death of the person funding the account.

There are a host of problems with joint bank accounts of this kind. For one, these accounts are among the most common means an unscrupulous person can steer money out of the Estate and into their pockets. For reasons I don’t pretend to understand, it’s apparently easier to convince an aging relative to add you as a “joint owner” of a bank account than it is to have them make a more clearly intentional gift.

In every Estate involving a joint bank account where the decedent paid in all of the money, it’s reasonable to ask whether the account is an asset of the Estate or if it should pass directly to the surviving “joint owner.”

At first blush, the law in New Jersey seems clear enough. The Multiple-party Deposit Account Act (NJSA 17:16I-1 et seq.) says that the money in a joint bank account will pass to the surviving owner and not to the Estate of the decedent “unless there is clear and convincing evidence of a different intention at the time the account is created.” The standard of “clear and convincing evidence” is a high one, nearly the civil law equivalent of the more familiar “beyond a reasonable doubt.”

The question gets a lot more complicated when the question of undue influence is raised. A presumption of undue influence can be created quite innocently under New Jersey law. I’ll write more about that elsewhere, but I think it’s enough to say that, in many instances, the decedent leaving a joint bank account named as joint owner someone they relied on, trusted, and were close enough to that the specter of undue influence isn’t far away.

If the relationship between the decedent and the survivor was of a nature that creates a presumption of undue influence, the burden of proving that the decedent intended a joint bank account to pass to the survivor and not to the estate is completely inverted. Now, the survivor must show that the creation of the joint account was not the product of undue influence.

And undue influence is not the sole grounds for directing a joint bank account back to the Estate. Our Appellate Division directs that “[e]ven if no undue influence is found, a trial judge should still be free to look at all the direct and circumstantial evidence available to determine whether the depositor intended to create survivorship rights.” That is, even without a finding of undue influence, the court should broadly examine all of the evidence — direct and indirect — to look for donative intent.

While the presumption the under Multiple-party Deposit Account Act might seem to make gifts by joint account almost unassailable, the full context of the law governing such gifts suggests that joint bank accounts should always be reviewed as a potential asset of the Estate. I think that joint bank accounts in nearly all cases have no role in prudent estate planning, and that in the administration of an estate, from a litigator’s perspective, these accounts should always be viewed with suspicion.

Probate Litigator