When client’s review their estate plan, there are several factors to consider, such as the disposition of their assets, estate and inheritance taxes and appointment of fiduciaries. Another factor that clients should consider, but often disregarded, is the possibility of litigation amongst the beneficiaries, or other individuals interested in the estate. While “will contests” arise in my different scenarios, one that could easily be prevented is litigation over “accounts of convenience”. The facts are something like this: an elderly parent adds a child on as a joint account holder. Elderly parent passes away. Joint account holder child takes the position that this account passes to him/her by operation of law as surviving account holder, whereas other sibling(s) argue that the account was an “account of convenience” and thus should be distributed in accordance with the individual’s Last Will and Testament, irrespective of the joint designation.
Since elderly parent is deceased, there would be no way of knowing what their intention was for this joint account, unless memorialized in some other manner. (Note, if this was truly a joint account, whereas both account holders were contributing to the account, sharing the tax liability, etc., then most likely it would be deemed a true joint account). Recently, the New Jersey Appellate Division, in the Matter of the Estate of DeFrank, reiterated the general rule that when a party to a joint account dies, the presumption is that a right of survivorship was created. However, the Appellate Division, stated that the presumption could be rebutted with evidence showing that undue influence was used in the creation of the joint accounts, or that the accounts were solely for the convenience of the depositor. The Court advised that it would review all direct and circumstantial evidence available to determine whether depositor intended to create survivorship rights. While Ms. DeFrank’s true intention in connection with this account may never be known, unfortunately, the litigation that ensued was most certainly costly to all parties involved, and likely caused a large divide within the family.
It is important to remember that accounts which are joint with another individual, or payable/transferable on death are non-probate assets, and thus, ordinarily do not pass in accordance with the decedent’s testamentary instrument. Rather, these accounts would pass to the surviving account holder, in the case of a joint account with right of survivorship, or to the beneficiary stated on the account’s beneficiary designation form. When reviewing your estate plan, it is very important to consider these assets and to reaffirm how they should be distributed at your passing. Moreover, these account titles and beneficiary forms should be reviewed regularly.
– Nicole E. Russak, Esq.