Do you have a bank account with another person listed as a joint owner? You probably have a joint tenancy bank account. Does that mean that the other owner could empty the account? For that matter, could you?
What is a joint tenancy bank account?
How do you know if you hold your bank account as a joint tenant? Generally speaking, if you asked the bank to put two or more names on the account, it will be in joint tenancy. The most important part of joint tenancy is the right of survivorship. So if your account title includes that phrase, you almost certainly have a joint tenancy account.
You might also see “JT” or even “JTROS” in the account title. Those abbreviations mean joint tenancy or joint tenancy with right of survivorship. That’s a clear indication that your account is a joint tenancy account.
“Right of survivorship” means, simply, that when one joint tenant dies the remaining account owner (or owners) now own the deceased person’s share. Imagine that Arthur, Brenda and Carol set up a JT account. When Carol dies, Arthur and Brenda now own the account as joint tenants. Later, when Arthur dies, Brenda is the sole owner of the account.
But Carol’s will left everything to her son, Dave
Sorry, Dave. You won’t get any part of the account that was held in joint tenancy. That’s why we keep saying that people need to pay attention to account titles — and beneficiary designations, too, for that matter.
The joint account rules are often referred to as “nonprobate transfer” rules. That’s because they are used precisely because they avoid the probate process. But that also means that they avoid the terms of the owner’s will, too.
Remember Arthur and Brenda? When Carol died, they would understand her wishes and give Dave “her” one-third of the account, right? No — not in our experience.
What about rights while all joint tenants are alive?
Let’s change the question a little bit. Suppose that our three owners of the joint tenancy bank account are all still alive. Carol put most of the money into the account. She put Arthur’s and Brenda’s names on the account for her convenience. That way they can pay bills without having Carol sign every check.
What happens if Arthur goes to the bank, closes the account and moves it to another bank in his name alone? Maybe Arthur is worried that Brenda is thinking of doing the same thing. Maybe he doesn’t think Brenda is entitled to inherit anything if Carol should die. Or maybe Arthur is just a thief.
Can Carol get her money back? Can Brenda insist on the account being restored?
Arizona law does address these questions. he “nonprobate transfers” section of the probate code includes a section on bank accounts. It says that Arthur, Brenda and Carol own the account in proportion to their contributions. There is a presumption, though, that they contributed equally. If Carol wants to sue Arthur for return of the money, she will have to prove that she contributed most or all of it.
One key element of the nonprobate transfer laws: Carol almost certainly has no claim against her bank for letting Arthur empty the account.
A recent court case from another state
We recently read about a Michigan Court of Appeals decision dealing with these issues. Of course, Michigan law is different from Arizona’s approach. The facts of the case, however, are absolutely commonplace.
Robert Lewis and Carol Rosebrook were a couple for almost a quarter-century, though they never got married. They had three bank accounts in their joint names. Virtually all of the money came from Mr. Lewis, but Ms. Rosebrook was named as a joint tenant and actually signed checks on the accounts from time to time.
When Mr. Lewis became ill, the couple split up and agreed to put everything on hold while they sorted out their respective positions. Meanwhile, Ms. Rosebrook visited the three banks and withdrew about $255,000 from the joint accounts.
Mr. Lewis’s daughter sued Ms. Rosebrook on his behalf. Mr. Lewis gave a deposition in which he said that he had not intended to make a gift of the money, and that he had not given permission to Ms. Rosebrook to take all of the money. Shortly after his testimony, Mr. Lewis died.
The Michigan probate court ruled that the couple had equal rights to the accounts. When Ms. Rosebrook emptied the accounts, she was just exercising her rights as a joint tenant.
The Michigan Court of Appeals disagreed. While Mr. Lewis was still alive, ruled the appellate judges, Ms. Rosebrook had a duty not to injure her joint tenant’s interests. The appellate court ordered the probate court to reconsider. Ms. Rosebrook would have to return one-half of the money to Mr. Lewis’s estate. Estate of Lewis v. Rosebrook, July 16, 2019.
What about Arizona’s law?
Would the same result have been reached under Arizona’s law on joint tenancy accounts? No.
Most likely, a lawsuit brought during Mr. Lewis’s life would have resulted in him recovering all of the accounts. If, in fact, Ms. Rosebrook did not contribute anything to the accounts, she might not have any interest in the balances. If Mr. Lewis’s testimony about the reason for setting up the joint tenancy accounts was to be believed, Ms. Rosebrook would probably be ordered to return all of the money.
Of course, the court might not believe Mr. Lewis’s explanation. And if the action had not been brought during Mr. Lewis’s life, the “right of survivorship” aspect of the joint tenancy accounts would probably have overridden any claim.
What’s the lesson? Be very, very careful about establishing joint tenancy bank accounts. Discuss any accounts, their titles and any beneficiary designations, with the lawyer who prepares your estate plan. Unintended consequences abound.