Take-Away: The assets held in a safe deposit box on the death of a joint tenant were not treated as a lifetime gift by the decedent. Consequently, the contents of the box were part of the deceased tenant’s distributable estate, much to the surprise of the surviving joint tenant of the box.

Background: Multiple elements exist for there to be a lifetime, or inter vivos, gift. The required elements for there to be a valid lifetime gift made by the donor include:

  1. The donor must possess the intent to transfer title gratuitously to the donee;
  2. There must be actual or constructive delivery of the subject matter to the donee, unless the property is already in the donee’s possession;
  3. The delivery of the property must be unconditional, i.e. absolute and irrevocable, and thus place the property within the control of the donee;
  4. The donee must accept the gift;
  5. The gift must be fully consummated during the donor’s lifetime; and
  6. The gift must vest ownership in the donee beyond the donor’s power of recall.
    In re Casey Estate, 306 Mich App 252, 263-264 (2014)

The beyond the donor’s power of recall element was dispositive in a recent Michigan Court of Appeals decision.

Court Decision: In re Estate of Shirley A. Huhta, Michigan Court of Appeals No. 343863, (Unpublished July 18, 2019)

Facts: Shirley had three children: Keith, Tina and Gary.  Shirley was in poor health in 2012. Shirley and her daughter, Tina, went to Wells Fargo in June 2012 and opened a safe deposit box. The box was leased in Tina’s name alone; only Tina had access to the box. Shirley placed $122,000 into that safe deposit box.

A month later Shirley signed a Will in which she left her estate to Tina and her son Keith in shares of equal value. [Gary, the other son, testified that he told his mother that he did not want an inheritance, which Shirley apparently honored.] At the same time she signed her Will, Shirley also signed a durable power of attorney for financial affairs, in which Tina was named as Shirley’s attorney-in-fact. Later, Shirley and Tina opened a joint checking account in their names.

In December 2012, Shirley formally obtained a right of access to the Wells Fargo safe deposit box that was in Tina’s sole name. Shirley’s name was added to the safe deposit box along with Tina’s as its tenant.

In October 2013, Shirley withdrew $38,000 from the Wells Fargo safe deposit box, leaving $84,000 in the box. Shirley used the withdrawn funds for her own purposes.

Shirley died in April 2014.

Shortly after Shirley’s death, Tina closed the Wells Fargo safe deposit box, removed the money, and she kept the money in her own home. Tina later used those funds for her own lifestyle purposes.

Tina was also going through a divorce at the time of her mother’s death. During the divorce discovery proceedings Tina disclosed the $84,000. Tina claimed that amount  was her inheritance, e. her separate property. Tina then claimed that $20,000 of those funds were earmarked for her brother Keith at her mother’s direction. Tina testified, though,  that she had borrowed the $20,000 from Keith because she did not have access to any marital assets during her divorce. It should come as no surprise that Keith denied agreeing to any such loan; he was not even aware of the $84,000 until it was disclosed as part of Tina’s divorce. Tina testified to using part of the $84,000 to purchase a boat, trailer and an ATV. (Hey, it all took place in Houghton County- what do you expect in the UP Tina had to borrow from her brother, according to her, since she had no money during her divorce, yet she needed the boat, trailer, and ATV!)

Claims: Keith sued Tina for fraud, unjust enrichment, conversion, and violation of fiduciary duty. More importantly, Keith claimed that the $84,000 held in the Wells Fargo safe deposit box was part of Shirley’s estate and should have been equally divided between Tina and him in accordance with Shirley’s Will. In response, Tina claimed that she was entitled to retain the $84,000 in the safe deposit box since her name was on the jointly leased box with Shirley, and that the funds had been gifted to her by Shirley while Shirley was alive, since Tina had full access to the box contents.

Probate Court: After a bench trial, the probate judge held that the $84,000 held in the joint safe deposit box had not been a gift from Shirley to Tina.

Appeals Court: The probate judge’s decision that the $84,000 in the safe deposit box was part of Shirley’s estate was sustained on appeal. As a result, Keith was entitled to 50% of the $84,000, reduced, however, by some outstanding loans that Keith owed his mother at the time of her death.

Not a Gift: With regard to Tina’s claim that the $84,000 was gifted to her by her mother, the Court found Tina’s position to be inconsistent with not only her own testimony (made during her divorce) but also Shirley’s actions while she was alive. Tina repeatedly testified (in her divorce) that the money in the safe deposit box was an inheritance that she received. Tina never referred in the divorce proceedings to the $84,000 as a gift from her mother. Only later did Tina testify at the bench trial that the safe deposit box funds were a lifetime gift to her. Additionally, Shirley had accessed the funds after they were placed in the joint safe deposit box, and used for her own purposes, which action indicated that Shirley had not unconditionally transferred the funds to Tina’s sole dominion and control. The Court also found relevant that Tina did not spend the money in the safe deposit box until after Shirley’s death. The Court thus concluded that Shirley had retained dominion and control over the safe deposit funds until her death.

Joint Safe Deposit Box: Nor did the Court find it significant that the funds were jointly accessible in the jointly leased safe deposit box. “When a safe deposit box lease does not explicitly provide for the passage of title of the contents of the box, but merely allows a joint right of access to the box, the joint right of access is one fact which may properly be considered in arriving at the decedent’s intent regarding another’s interest in such contents. Having joint right of access does not by itself effect a change in ownership of the contents of the box. Here, Shirley and [Tina’s] actions with respect to the safe deposit box supported the trial court’s finding that Shirley did not intend to irrevocably transfer the $84,000 to [Tina] as a gift.”

Rhetorical Question: Why would anyone place $122,000 cash in a safe deposit box?

Conclusion: Like a joint bank account, a jointly leased or jointly accessible leased safe deposit box is controlled by the contract with the financial institution. Whether survivorship rights are bestowed on the account or box ‘owners’ will be determined with reference to that contract’s provisions. Just because there exists a survivor to the account or box does not automatically cause a ‘survivor takes all’ result. In sum, it is dangerous to always assume that survivorship principles always prevail with joint bank accounts or safe deposit accounts.