Joint accounts are often meant to make the financial lives of the parties involved easier, such as in the case of marriage or in a caretaker situation. But what happens when one party dies? Does the money automatically belong to the remaining party? For example, let’s say that a man dies and leaves $20,000 to his grandson in his will. Prior to the man’s death, he added his son to the account to help him pay his bills. All of the cash he had was in that account. Who is legally entitled to the money – the son, who was on the account, or the beneficiary who received the gift from his will?
A few years ago my colleague Jon Gruber wrote an article about risks with joint accounts and the law that was enacted in Pennsylvania called the Multiple Parties Account Act (MPAA). This act sets forth the rights of parties to a joint account and applies when an individual dies owning an account jointly with another person.
Under the MPAA, the law presumes that a joint account owner intends his co-owner to take the money in the joint account upon his death, and this presumption is only overcome by clear and convincing evidence to the contrary.
According to the MPAA definition, an account is "a contract of deposit of funds between a depositor and a financial institution, and includes a checking account, saving account, certificate of deposit, share account and other like arrangements." A joint account is "an account payable on request to one or more of two or more parties whether or not mention is made of any right of survivorship." Therefore, unless the grandson initiates a lawsuit and comes up with clear and convincing evidence his grandfather did not intend his father to receive the money in the account upon his death, dad gets the money.
What this means for people doing their estate planning is taking additional steps to ensure that their true wishes are carried out. The primary distinction that must be made when a joint account is established is whether an individual, especially one who is elderly, is adding the other account owner for convenience or whether the person is being added because he is to receive the account balance upon death as a gift. This is true regardless of whether the other person on the account is a relative, friend or spouse.
If the co-owner is being added for gift purposes, you may want to consult an attorney to review your situation and ensure that no other parties will have grounds to raise a claim to those account funds after death. If the co-owner is being added for convenience, meaning this person will assist with paying bills or managing finances, a letter or declaration, which may act as a will amendment or codicil, should be placed with the will stating this. This will overcome the presumption the joint account was intended to give the co-owner the balance upon the other owner’s death. In either case, an attorney will be able to assist you in executing the essential legal documents, ensuring that the account funds go to the intended party.
Derek Dissinger is an attorney at Russell, Krafft & Gruber, LLP in Lancaster, Pennsylvania. He received his law degree from Duquesne University and practices in a variety of areas, including Estate Planning and Estate Administration.