Joint Bank Account May
Not Avoid Probate
In 2010, the
ruled that Certificates of Deposit owned in the
name of the depositor and one of his daughters would have to
be added to the deceased depositor's probate estate and
distributed according to his will.
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This may surprise many people who believe that adding
another person as joint owner of a bank account will keep
the account out of probate.
Generally, when one owner of a joint bank account dies, the
account is payable to the other joint owner(s) without the
necessity of a probate proceeding. Because of this,
joint accounts have been called a "poor man's will." Many
folks have established joint accounts for this very reason
-- so that the money will go directly to the other owner(s)
I have written in the past about the dangers of joint
accounts during the life of the depositor here and here.
This case illustrates how unintended consequences may occur
after the depositor's death.
The paramount issue in this case concerned the depositor's
intent when he opened the joint accounts. Did he
intend his daughter to become the sole owner of the
certificates of deposit after his death, or did he name her
only for convenience, intending that she distribute the
funds in the accounts among all of the beneficiaries that he
named in his will?
Apparently, he hadn't told anyone in the family what his
intentions were when he opened the accounts, and the
daughter named as joint owner didn't learn about the
accounts until after his death. It's possible that he
named the daughter as joint owner on the advice of bank
personnel who told him he could avoid probate that way.
Minnesota law provides that after the death of one
depositor, the money in a joint account belongs to the
surviving owner(s) unless there is clear and convincing
evidence of a contrary intention. In this recent case,
two out of three appeals judges agreed that the testimony
and evidence in the case established sufficient proof that
the depositor did not intend the accounts to go to the joint
owner. One judge disagreed, reasoning that since there
was no evidence of the depositor's intent at the time he
opened the joint accounts, the accounts should belong to the
This case was then appealed to the Minnesota Supreme Court,
which reversed the Court of Appeals holding, ruling that
"the surviving owner of certificates of deposit, designated
as joint accounts, is entitled to the funds upon the death
of the other joint owner, as against the decedent's estate,
unless there is clear and convincing evidence of a different
intention or there is a different disposition made by a
valid will, either of which must specifically refer to the
certificates of deposit." While this result may be
more in line with what you would expect, it is interesting
to note that in order to arrive at this result, the parties
had to go to court, and then have the issue appealed all the
way to the state supreme court.
This case illustrates the confusion and potential costly
problems that can result from adding children as joint
owners on bank accounts. Usually this is done in order
to avoid the costs of probate, but obviously in this case it
backfired, in all likelihood costing the parties much more
than it would have cost to probate the estate.
The final result in this case may be what the depositor had
intended. But we don't know for sure.
This case does illustrate the importance of making sure that
your account designations and estate planning documents are
consistent, or that any inconsistency is documented to
clarify what your intentions are. And, in light of the
legislature's recent changes that allow personal property in
estates of up to $50,000 to pass to survivors without
probate, as well as the new Transfer on Death Deeds, the
utility of joint accounts as probate avoidance mechanisms
has been reduced for many people.
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