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Whose Money is it, Anyway?


California Court Limits Rights of Survivorship Account Holders

By Austin Adams

A recent case decided by the California Court of Appeals places new limitations on the ownership rights of joint bank account owners.  Previously, the terms of the account would control, and the surviving joint owner of a bank account would receive any funds in the account at the decedent’s death.  The recent decision in Placencia v. Strazicich (2019) 42 Cal.App.5th 730 (“Placencia”) changes that by allowing clear and convincing evidence of the decedent’s intent to in some cases override the written terms of the bank account, giving ownership of the money in the account to a beneficiary other than the person named as the joint account holder.

In Placencia, the Court of Appeals considered the following situation: Ralph Placencia died, leaving behind a will, a trust, and a joint bank account with an express right of survivorship naming Lisa, one of his three daughters, as beneficiary.  Ralph’s will stated that the joint account was not to go to Lisa but was instead to go to Ralph’s trust.  The bank gave the money to Lisa according to the terms of the account.  Ralph’s other daughters filed suit against Lisa, claiming that the money should go to the trust according to the terms of Ralph’s will.

The court determined that the bank was right to follow the terms of the account and give the money to Lisa, but that actual ownership of the account should be determined by Ralph’s intent as evidenced in his will, and should go to his trust.  The court held that Ralph’s other daughters had a valid claim against Lisa for any funds she had already taken out of the account.

Bank Account Terms Versus Actual Ownership Interest

The relevant statutes here are Probate Code sections 5302 and 5303.  Section 5302(a) provides that joint accounts include a right of survivorship “unless there is clear and convincing evidence of a different intent.”  Section 5303 states that “rights of survivorship are determined by the form of the account at the death of the party,” and goes on to state that a decedent’s will cannot change the right of survivorship.

A cursory reading of the two statutes suggests that a decedent’s will cannot change the ownership interest in a joint account.  However, the Placencia court held that it can.  To harmonize the tension between their conclusion and the terms of the Probate Code, the court pointed to the fact that Probate Code section 5302 governs the ownership interest in the account, while Code section 5303 governs the right of survivorship.  The court in Placencia distinguished between those two, holding that a right of survivorship in an account does not equate to an ownership interest in the contents of that account.

The importance of this distinction is that it protects banks from liability by preserving the ascertainable and objective standard of the terms of an account, while simultaneously honoring clear expressions of a decedent’s intent as evidenced in their will.

Placencia Creates a Problem for Surviving Joint Account Holders

The short straw here is drawn by the surviving joint account holder, who is put in the uncomfortable situation of having money available in an account in their own name, but with no guarantee that the money is legally theirs.  The once-clear right of survivorship is now clouded by the possibility that clear and convincing evidence will surface showing that the decedent intended to give the account to someone else.  To make matters worse, where the surviving account holder uses that money and then finds out that the decedent’s will distributes them to another person, that person has a valid claim to the money against the surviving account holder.

The Placencia court found that the express terms of a joint account do not automatically control the ownership of the account.  This decision highlights the importance of ensuring that each step of the estate planning or post-death process is taken with a full understanding of the law and of the ramifications of the decisions made as a part of those processes.  A good California trust and estate planning attorney can walk you through the process and provide the security of knowing that everything is being done right.  For a free estate planning or probate consultation, call our office at (916) 237-8781.

The post Whose Money is it, Anyway? appeared first on Huber Fox, P.C..

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