24-Jun-22
Joint Bank Accounts – Intent Trumps Survivorship
Take-Away: Sometimes we make the erroneous assumption that the named co-owner of a joint bank account is entitled to the account balance on the other co-owner’s death. That statutory presumption can, at times, be rebutted with evidence that no survivorship principles were intended when the joint account is opened.
Background: Michigan has several different statutes that deal with joint bank accounts, enough statutes to cause a fair amount of ‘head-spinning’ over which one applies to a joint account, with nuances associated with each joint account statute. A joint bank account that is established under MCL 487.703 provides for two primary rights: (i) a right of proportional share of the funds held in the joint account; and (ii) a right of survivorship. However, the joint account holders, by virtue of their words and deeds, can also agree to place other restrictions or conditions on their joint account. One common situation where a condition is placed on a joint bank account is the added expression an intent that “the funds held in this joint account are for the convenience of the depositor only”, or that the funds placed in the joint account by the depositor are “subject to the depositor’s unilateral revocation and withdrawal rights.” Yet, the question sometimes surfaces as to what conditions are permissible, or where are those imposed conditions are located especially, when the joint bank account is opened using a bank’s preprinted account opening document, and there is no ‘room’ to provide those additional conditions or restrictions. That question of implied restrictions took an interesting twist in a recent case from the Michigan Court of Appeals.
In re Estate of Eldon Knoblock, Michigan Court of Appeals, No. 356451, April 21, 2022
Facts: Eldon and Constance were married in 1982. They opened a joint bank account at that time. Eldon and Constance divorced 10 years later. At the time of their divorce, their joint bank account had a balance of $1,481.17. Unfortunately, this joint bank account was not expressly identified in their Judgment of Divorce. That Judgment merely awarded to each party as their sole and separate property, any real, personal or mixed property ‘then in his or her possession.’ Only Constance used an attorney who prepared the Judgment of Divorce. After the divorce, Eldon never took any action to remove Constance’s name from the joint bank account. Only Eldon received monthly account statements. Only Eldon made post-divorce deposits to that joint account. Constance candidly conceded only after Eldon’s death that she was totally unaware that the joint bank account existed, and thus she had not made any deposits to the joint account. Only after Eldon died in 2020, 30 years later, was Constance made aware of the existence of the joint account. At the time of Eldon’s death, the joint account had a balance of $144,000. A petition was filed by the PR of Eldon’s estate (not a ‘complaint’ to determine the account’s true ownership, which was a ‘side issue’ that the Court dealt with) as to Constance’s rights, if any, to the balance of the joint bank account. No surprise, since it was a joint bank account, “with full rights of survivorship,” that Constance made the claim that she was entitled to the entire balance of the account- all $144,000.
Probate Court: The probate court held that Constance was entitled to 50% of the value of the joint bank account at the time of the divorce ($740.59), but none of the increase in the joint account’s value after the divorce. Since $144,000 was at stake, Constance decided to appeal this decision.
Appellate Court: The Michigan Court of Appeals affirmed the decision of the probate court. In doing so, the Court addressed several arguments raised by Constance.
Interpreted the Judgment: Rather than amend the parties’ Judgement of Divorce, or it dividing the parties’ marital assets, as claimed by Constance, the Court found that the probate court had only interpreted that Judgment of Divorce. Moreover, the probate court statutorily possessed concurrent legal and equitable jurisdiction with other courts to hear claims for the return of property owned by another from the decedent’s estate. In short, the probate court had the statutory jurisdiction to determine contested ownership, and all it did was interpret, not rewrite, the 30-year old Judgment of Divorce.
Rebuttable Prima Facie Evidence of Survivorship: The Court adopted the probate judge’s observation that a joint bank account is a ‘poor man’s Will’ and that the various Michigan statutes that have been adopted to deal with these frequently used joint accounts, are intended to relieve banks from liability for distributing account assets to a joint (surviving) owner. However, these statutes only provide prima facie evidence of an intent to vest title in the surviving joint owner. In other words, that prima facie evidence of intent to vest ownership in the surviving account owner can be rebutted. “The creation of a joint account with rights of survivorship fixes the ownership of the joint account ‘in persons named as joint tenants’ unless there is competent evidence showing otherwise, and the ‘ownership remains joint between the parties until and unless there is a surviving party, in which case sole title vests in the survivor.”
Intent of Depositor: The probate judge, echoed by the Court, found that the joint bank account statute only created a presumption, which had been rebutted by reasonably clear and persuasive proof to the contrary, i.e. by proof of the decedent’s intent that title to the jointly held funds not vest in the survivor. Thus, a party’s rights to funds held in a joint account are ‘determined by the intent of the depositor at the time of the deposit.’
No Intent for Survivorship: Specifically the probate judge found that while the parties had clearly intended to establish a joint bank account when it was initially opened with rights of survivorship, that intent was not determinative of how Eldon’s post-divorce contributions to the account were to be addressed. The facts focused upon the probate judge were that: (i) for over 30 years only Eldon controlled and transacted deposits and withdrawals from the joint account; (ii) during those 30 years Constance never made any claim of entitlement to the joint account; (iii) Constance conceded that she knew nothing about the joint bank account for those 30 years until Eldon’s PR filed his petition with the probate court to determine ownership; (iv) Constance never received any account statements with regard to the account; and (v) only Constance was represented by legal counsel in the divorce and he prepared the judgment (implying that the oversight was attributable to Constance through her own attorney.) From these facts the Court concluded that the failure to address the joint account in the Judgment of Divorce was an oversight, and that no intent was established through the evidence as to any intended survivorship rights with respect to Eldon’s post-divorce contributions to the joint bank account.
‘Catch-all’ Provision: One last claim made by Constance was that the Judgment of Divorce’s ‘catch-all’ distribution directive, i.e. the one which awarded to each party his or her sole and separate property “as well as any other property, real, personal or mixed, in his or her possession” could not be interpreted to terminate her survivorship interest in the joint bank account. The Court disagreed, noting that often a ‘catch all’ provision in a Judgment of Divorce is limited to ‘tangible personal property’ but in this instance the ‘catch all’ provision included any personal property and, therefore the account itself constituted a form of personal property awarded to Eldon [since the account was in his possession], thus terminating Constance’s survivorship interest in the joint bank account.
Conclusion: I guess there are a couple of ‘take-aways’ from this decision. First, folks leaving a divorce are notorious for not tying up loose ends and re-titling awarded assets in their own names, thus leading to post-divorce litigation like was the case in In re Knoblock. Better that they spend a few more dollars with their attorneys making sure that what they fought long and hard for is correctly titled in their own name without any ‘loose ends.’ Second, even a joint tenants with full rights of survivorship bank account may not automatically pass to the surviving joint bank account owner if there is some evidence that other restrictions or limitations were placed on that joint bank account. Note that in In re Knoblock Eldon did not actually do anything to repudiate Constance’s survivor rights in the joint account, yet in the end, the Court ascribed an intent to Eldon to not benefit his former wife, effectively terminating her survivorship interests in the joint account.