Who gets a joint bank account after the decedent’s death? The answer is deceptively complicated.
A common misunderstanding is that the decedent’s will governs the disposition of joint accounts. It does not. Instead, the account agreement with the bank “trumps” the will.
In general, a surviving owner is free to withdraw the entire account after the decedents’ death. Thus, as far as the bank is concerned, the funds may be paid to the surviving owner without risk of having to pay twice. However possession of the funds is not necessarily the same as ownership.
While a joint account is presumed to be owned by the surviving owner (see ORS 708A.470(1)), the rebuttable presumption may be overcome by evidence that the decedent intended a different result or lacked capacity when the joint account was established. ORS 708A.470(6). It is common for a parent to name a child as co-owner of a bank account, so that the child can help the parent pay bills. In this scenario, the child is co-owner for the mere convenience of the parent, and the child is not the legal owner of the funds at death. Assuming there is ample evidence of the “convenience” intent, the executor of the estate can compel the child to return the funds. But it is not always that simple.
The co-owner who assists the parent with finances is often the child who bears a disproportionate burden of caring for the parent. There may be discussions or verbal understandings that this child will ultimately take the account as compensation for care services. Proof is problematic. Typically, the agreement is oral, and the parent’s comments to one child may differ from those to an other. There is seldom a “track record” whereby the parent (prior to losing mental capacity) has consistently made monthly payments to the child for care services. This can lead to endless arguments between the children. A child who has sacrificed part of his or her life to care for a disabled parent may be compensated with a “thank you” and nothing more. In fact, the siblings may contend that the child owes the estate for rent, if the child was staying with the parent.
If an heir believes a joint account belongs to the estate (rather than the joint owner), how does one protect the interest of the estate? A bank is not liable for distributing the account to the surviving owner unless the bank receives prior notice of the adverse claim. ORS 708A.470(7). In addition to providing notice, the claimant must either (1) procure a restraining order or injunction against the bank in an action joining the co-owner, or (2) provide the bank a surety bond or letter of credit indemnifying the bank against liability. ORS 708A.435(1). As you can imagine, this imposes an expensive burden on the person trying to protect the estate.
A bank might be willing to freeze a joint account without jumping through the hoops described above. Occasionally, I have requested a bank in writing to freeze an account, and it has complied. A more common approach is for the executor to adjust the joint owner’s share of the estate passing under the decedent’s will. This forces the joint owner to object to the executor’s final account and cover the circumstances underlying the joint account at a hearing before the court.
Joint accounts have other collateral consequences. An executor is entitled to a fee of roughly 2% of each probate asset, and 1% of each non probate asset. See ORS 116.173. Joint accounts are not probate assets, since they pass outside of the will. Thus, the ultimate characterization of a joint account may have a material effect on the executor fee.
In conclusion, joint accounts are the source of many disputes, and should be used sparingly. If the account is intended to pass to the joint owner, the parent should so indicate in writing.