We have all heard the expression about the “poor man’s will” being created by adding children or spouses as joint owners of one’s assets, including bank accounts.
The rationale is that this avoids the judicial probate process by having all of one’s assets pass outside of probate, according to the joint designation.
As we discussed previously, joint accounts are also frequently used as a supposedly easier way to allow a trusted family member to handle the expenses of the other account holder. When this is the intent, the account is known as a “convenience account.”
It is not unusual for plans centered around a joint account designation to go off track, however. As to the account holder’s intent to avoid probate and have the account pass to the other joint owner, the result is rarely that simple, as the joint account designation can be attacked by a beneficiary who otherwise would have received some or all of the account, either under a will or by intestacy, after the account holder’s death. Litigation can, and frequently does, ensue regarding whether the deceased account holder truly intended for the assets in the joint account to pass to the other owner.
In New Jersey, the starting point for any analysis of this issue is the Multi-Party Deposit Account Act, which provides that the amount remaining on the death of one account holder passes to the other owner unless there is clear and convincing evidence of a different intention at the time the account is created. In other words, the “poor man’s will” will go into effect unless it is shown, by the elevated standard of clear and convincing evidence, that a “poor man’s will” was not intended. Even if the party challenging the account fails to demonstrate a contrary intention, however, he or she may still challenge the joint designation if the two account holders shared a confidential relationship. In that case, the burden would be on the living joint owner to demonstrate that he or she did not exert undue influence over the deceased owner in creating the account and that the deceased account owner understood the effect of the joint designation.
While technically distinct, these inquiries overlap in many ways. Determining the intent of the deceased account holder at the time the account was created, for purposes of the Multi-Party Deposit Account Act, is similar to determining whether the deceased account holder understood the effect of the joint designation, under a confidential relationship/undue influence analysis. The critical distinction in any litigation, though, may be that the burden is on the challenger of the account under the Act, while it is on the beneficiary of the account under a confidential relationship/undue influence analysis.
Thus, while joint designations may have some surface appeal, they often lead to the uncertainty and expenditure of legal fees they were intended to avoid. If a loved one has died, and you are in the position of trying to determine whether an account was a “true” joint account as opposed to a convenience account, here are three factors to consider.
As discussed in prior posts and above, joint accounts can be useful, but careful consideration should go into the decision of whether to create one.
If you have any questions about this post or any other related matter, please email me at firstname.lastname@example.org.