Joint Bank Account Rules on Death Could Be Impacted by the Decedent’s Estate Planning Documents

What are joint bank account rules on death? What is right of survivorship in a joint account? Do all joint bank accounts have a right of survivorship? Does a joint account with rights of survivorship automatically entitle the surviving account owner to all the account funds after the other account owner dies?

The right of survivorship in the context of financial accounts means that if multiple parties are the named owners on any account (e.g., bank accounts, retirement accounts, annuities), and one of the parties passes away, the surviving party or parties will automatically become sole owners of the account funds. Thus, the rules surrounding joint bank accounts on death allow account funds contained in joint accounts with rights of survivorship to transfer automatically to the surviving joint account holder upon the death of the joint account holder, and this transfer occurs outside of the probate court process.

It is not uncommon for an aging parent to add an adult child to their account as a joint holder in order to assist with asset management or financial assistance. And a parent co-owing a joint account with right of survivorship with an adult child can be a convenient way to pass funds from the parent (at the parent’s death) to the named child outside of probate. However, what does right of survivorship mean on a joint bank account when there is evidence that shows that the decedent actually intended a different result?

Provisions of the California Probate Code set the ground rules for the treatment of joint accounts after death, but the statutory language can be somewhat unclear and contradictory. Joint bank account rules on death are further complicated when there is evidence in the decedent’s estate plan to suggest that the decedent intended for the account to be distributed at death differently than simply to the surviving joint account holder.

A California appellate court recently considered such a situation in Placencia v. Strazicich.[1] In Placencia, the Court of Appeal clarified that the surviving account holder’s presumed right of survivorship can be overcome by clear and convincing evidence of a contrary intent on behalf of the person (here, the decedent) who established the account.[2] And this contrary intent can be expressed in the decedent’s estate planning documents.

Placencia v. Strazicich: Decedent Sets up a Joint Account With Rights of Survivorship but Later Executes a Will Disposing of the Right of Survivorship

In 1985, Ralph Placencia opened a joint investment account (the “Franklin Fund Account”) with one of his three daughters, Lisa Strazicich, with the right of survivorship. During his lifetime, Ralph contributed all the money to the account, and Ralph was also the only person to withdraw any funds from this account.[3]

In 2009, Ralph executed a will with the help of his brother-in-law, Henry. His will left specific directions about the disposition of the joint account with rights of survivorship, the Franklin Fund Account, stating: “Remove Lisa Strazicich as sole beneficiary of my Franklin Fund. I want the beneficiaries to be Lisa Strazicich, Stephanie A. Placencia and Tina R. Placencia, my three daughters. I want the Franklin Fund to be placed into my trust fund and then be used to pay off the mortgage of my home in Huntington Beach, CA.” Henry confirmed that Ralph specifically made these requests in their conversations.[4]

Shortly after executing his will, Ralph passed away. Upon his death, Lisa (as the surviving joint account holder) transferred all the assets in the joint Franklin Fund Account to her own account. While it is standard for the funds in a multiple-party account with right of survivorship to pass to the surviving account holder following the death of a joint account holder, the decedent’s estate plan complicated the rules relating to joint accounts after death. Litigation ensued.[5]

Relevant California Probate Code Sections and Case Law: What Does the Right of Survivorship in a Joint Account Mean if it Contradicts the Deceased Account Holder’s Stated Wishes?

Probate Code section 5302(a) provides that when the death a joint account holder occurs, the account becomes the property of the other joint account holder, “unless there is clear and convincing evidence of a different intent.” Although not stated explicitly, a party’s intent can be shown in a variety of ways.[6]

Probate Code section 5303, however, states that “rights of survivorship are determined by the form of the account at the death of the party” and specifies a short list of exclusive methods through which a joint account holder can change the terms of an account. Moreover, section 5302(e) explicitly states that “[a] right of survivorship arising from the express terms of the account or under this section…cannot be changed by will.”[7] And although a prior Court of Appeal decision (in Araiza v. Younkin (2010) 188 Cal.App.4th 1120) concerning a similar fact pattern found that the terms of a decedent’s trust were sufficient to supersede the beneficiary designation on the decedent’s bank account, the Araiza court limited its holding to trusts, opining that: “Because the change was made by a living trust rather than by a will, it is not invalidated by section 5302, subdivision (e).”[8]

At first read, sections 5302 and 5303 appear to be at odds. Section 5303 could be understood to state that, outside the enumerated methods listed, the ownership designations on joint accounts with rights of survivorship will be dispositive in determining if the account passes to the surviving account holder. Conversely, section 5302 suggests that even if the methods listed in section 5303 to change the terms of a joint account are not followed, the account will not transfer to the surviving account holder if there is clear and convincing evidence that the deceased (and original) account holder intended otherwise.

The Court of Appeal in Placencia provided clarity to this situation where the joint account is not altered by any of the enumerated methods listed in section 5303, but where the decedent / original account holder expressed an intent to negate the right of survivorship in his will.[9]

The Court of Appeal Clarifies that Probate Code Sections 5302 and 5303 Address Different Issues Concerning Joint Bank Account Rules on Death

The Court of Appeal in Placencia held that section 5302 directs the court to honor the clear intent of the person who established the account after the death of the joint account holder, even where the enumerated procedures to modify the terms of the joint tenancy account provided in section 5303 are not followed, and even if that contrary intent is expressed through a will.[10]

In coming to its holding, the Placencia court harmonized the two above statutes by explaining that sections 5302 and 5303 each have its own unique purpose. The court explained that section 5303 governs the express terms of the account itself and provides methods for changing the terms of a multi-party account with right of survivorship that determine whether a bank is liable for allowing someone to withdraw money from that joint account. Section 5302, meanwhile, is concerned with determining who actually owns the joint account.[11]

Thus, Ralph’s will, which evidenced Ralph’s clear and convincing intent to change the survivorship interest of the Franklin Fund Account, was sufficient to effectively change the beneficial interest of this account to the decedent’s estate under section 5302, without changing the express terms of the account itself under section 5303.[12]

The court also explained that while the decedent’s will by itself may not have altered the right of survivorship on the joint account pursuant to section 5302(e), that section does not preclude the will from serving as evidence of the decedent’s intent. And it is the original account holder’s intent as shown by this will that alters the right of survivorship, not the will itself.[13] As such, the appellate court ruled that, notwithstanding its joint ownership, the Franklin Fund Account was not owned by the surviving joint owner after the death of the joint account holder, but rather was as asset of the decedent’s estate to be distributed in accordance with the terms of the decedent’s will.

The Takeaway: Rules Regarding the Disposition of Joint Accounts With Rights of Survivorship After the Death of a Joint Account Holder Are Based on the Original Account Holder’s Intent

A right of survivorship in a joint account is no longer absolute. Instead, whether a joint account has an enforceable right of survivorship will turn on evidence of the initial account holder’s intent, which, in the case of a decedent, can include statements made in a will. Although the standard is still high, in that clear and convincing evidence of a contrary intent must be shown, the Placencia case provides that the path to successfully negating the right of survivorship in a joint account under the Probate Code is wider than what it was once thought to be.

Have More Questions About Joint Bank Account Rules on Death? Call Our Probate Lawyers Today!

What does it mean to have right of survivorship on bank accounts? As a joint account holder, are you automatically entitled to account funds after the death of an account holder? The laws surrounding financial accounts after death can be complicated, so it is best to navigate them with the help of an experienced probate lawyer, who can enforce your rights and ensure that a decedent’s intended final wishes are honored. Call us today to schedule your free consultation with a probate lawyer at Keystone Law Group.

Sources
  • [1] (2019) 42 Cal.App.5th 730.
  • [2] Id.
  • [3] Id. at 732-733.
  • [4] Id.
  • [5] Id. at 734.
  • [6] Prob. C. § 5302(a).
  • [7] Prob. C. § 5303(a), (e).
  • [8] 188 Cal.App.4th at 1126.
  • [9] (2019) 42 Cal.App.5th 730.
  • [10] Id. at 734-736.
  • [11] Id.
  • [12] Id.
  • [13] Id. at 736-737.