What are the Benefits–and Potential Risks–of a Joint Tenancy Bank Account?

There are a number of estate planning tools that can help reduce the size of your future probate estate. One such tool is a joint tenancy. This basically refers to property that is co-owned by two individuals with the understanding that the survivor inherits full ownership outright.

For example, let’s say you set up a joint tenancy bank account with your daughter. Both of your names are on the account. When you die, your daughter simply becomes the sole owner. The account itself is not considered part of your probate estate, so it will not pass under your will.

A joint tenancy can therefore make it much easier to pass property along to a loved one. But you also need to be careful when setting up these types of accounts. Under New York law, a joint tenant always maintains a one-half interest in the account while the other tenant is alive. In other words, even if you funded the joint tenancy account entirely with your own money, your daughter is free to withdraw half of the balance at any time while you are still alive.

Albany Judge Rules Man Must Return Half of Late Partner’s Brokerage Account to Her Estate

So what happens if a joint tenant tries to take the entire account before the other tenant dies? A recent decision from Albany Surrogate’s Court, Matter of Mahoney, helps to illustrate the answer to this question. This case involves a Charles Schwab account that was jointly owned by a now-deceased Albany woman (decedent) and her long-time companion.

Prior to the decedent’s death, the partner transferred the entire Schwab account to a separate account that was in his sole name. After the decedent died, her children sued the partner, claiming they were entitled to half of the proceeds from the Schwab account since the partner’s premature withdrawal effectively “severed” the joint tenancy.

The Surrogate’s Court agreed. The judge explained this was actually more of a misunderstanding than anything else. Schwab told the partner someone was trying to access the joint account. In fact it was the decedent’s son, who held her power of attorney. The son was attempting to freeze the account–which would have deprived the partner of access to his half. The partner then moved the entire account to his sole name to prevent this action.

The problem, the judge noted, was that both the son’s and the partner’s actions effectively broke the joint tenancy. So while the judge was “sympathetic” to the partner and felt the entire account was rightly his, by law he still had to refund one-half of it back to the decedent’s estate.

Speak with a New York Estate Planning Lawyer Today

Situations like the one described above are completely preventable. Like many estate planning disputes, they are rooted in a lack of communication among family members. If you need assistance in dealing with a potentially complicated family financial situation, it is your best interest to work with a qualified Putnam County estate planning attorney. Contact Meyer & Spencer, PC, today to schedule a consultation with a member of our team.

Source:

scholar.google.com/scholar_case?case=7625392566227164499

https://www.meyer-spencer.com/dealing-with-paternity-claims-during-the-probate-of-a-new-york-estate/