As our clients age they often tell us they do not feel comfortable with their ability to continue to manage their financial affairs. They also express the unfounded fear that upon their death all their bank accounts will be frozen for months on end with no ability for anyone to access their funds to satisfy their obligations after death for the care of their home or loved ones. The common step taken by many is to put a family member or trusted friend on their accounts as joint owner so that in the case of a disability or death, funds will be readily accessible to satisfy the client’s obligations without interference.
Unfortunately, this step, although well-intentioned, has sometimes resulted in significant confusion, litigation and costs to the client’s estate because the creation of the joint account and the transfer of those assets to the surviving joint owner at death were not clearly understood by the elderly client or were not properly explained to her by the custodian of the account.
This miscalculation was recently demonstrated in an Appellate Division case, In the Matter of the Estate of Jones, No. A-2557-16T2, 2018 WL 4471686 (N.J. Super. Ct. App. Div. Sept. 19, 2018). Subsequent to the death of her husband, Erna M. Jones visited her investment broker with her middle daughter, Barbara, to open a new account distinct from the one she held jointly with her husband. Mrs. Jones executed a new account application that identified her daughter Barbara as a second party, and the box was checked that the account was “Joint Tenants with Right of Survivorship.” Subsequent to this account opening, Mrs. Jones managed the account, paid her bills and handled her investments with the representative of the brokerage company. At her death in 2015, her daughter Barbara claimed the account as hers as the surviving joint tenant. Barbara’s older brother, David, objected and filed a Complaint under New Jersey’s Multi-Party Deposit Account Act (“MPDAA”) alleging that the account was not held with right of survivorship but was merely a “convenience account,” and that all money in the account was to be distributed equally amongst Mrs. Jones’ surviving three children. Mrs. Jones’ Last Will and Testament provided that her estate was to be divided equally amongst her children and throughout her life, David stated, she had always treated her three children equally. David further alleged that Barbara had utilized undue influence in getting her mother to name her as a joint owner on the account.
The Trial Court found that Barbara did not exercise undue influence at the time the account was opened. The Court further found that Erna Jones did not open the account as a convenience account, but that Barbara was a rightful joint owner and was entitled to all funds in the account upon the decedent’s death. David appealed the Trial Court’s decision, but the Appellate Division affirmed.
The Appeals Court found that the account was a joint account, not a convenience account. The Court relied on that portion of the MPDAA which provides, in part, that “sums remaining on deposit at the death of a party to a joint account belong to the surviving party or parties as against the estate of the decedent unless there is clear and convincing evidence of a different intention at the time the account is created.” N.J.S.A. 17:161-5(a). The Appellate Division found there was sufficient evidence, corroborated by the testimony of Barbara and the representative of the investment brokerage company, that there was no different intention at the time the account was created, i.e., that it was not created for the mere convenience of the decedent. The Appellate Division also agreed with the Trial Court that there was no undue influence. Barbara was able to show that even though she had a confidential relationship with her mother, she did not exercise any undue influence at the time the account was created. As noted, the decedent continued to make her own financial and investment decisions, remained independent of her daughter and handled all her own expenses. Barbara was able to present clear and convincing evidence that she did not exercise undue influence over the decedent regarding the account.
This is an object lesson for anyone who seeks to add a party to one of their accounts. If it is the intention of the account holder to have the added party be the sole owner of all assets in the account at the account holder’s death, then it is perfectly appropriate to name that party as a joint owner. But if the intention is to name someone to assist during a period of the account owner’s disability, the party should not be named a joint owner on the account but instead should be given power of attorney over the account. In that way, the assets in the account will pass through the account owner’s estate to the intended beneficiaries under the will.
To avoid family strife and the unnecessary costs and delay of litigation over this sensitive issue, it is essential that these conversations be had at the time the account is opened and continuing thereafter in order that family members are aware of the intentions of the account owner.