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Joint Bank Account with a Parent and the Parent Dies

checkbook and tablet screen of bank joint bank account with parent and parent dies

What happens with a joint bank account with a parent and the parent dies? Under New York Banking Law § 675 (a), there is a presumption that a joint bank account held by two persons is a joint bank account with rights of survivorship. You may be able to rebut this presumption by proving that the bank account was opened “for convenience only” under New York Banking Law § 678.

If you have an issue with a bank account with a parent and parent died, we at the Law Offices of Albert Goodwin are here for you. You can call us at 718-509-9774 or send us an email at attorneyalbertgoodwin@gmail.com.

Joint bank account with rights of survivorship

New York Banking Law § 675 states that when two or more persons open a bank account, making a deposit of cash, securities, or other property, a presumption of joint tenancy with right of survivorship arises. Matter of New York Community Bank v. Bank of America, et. al., 169 A.D.3d 35 (2019).

In a joint tenancy with right of survivorship, the surviving depositor will receive the entire amount in the bank account, without need of probate, when the co-depositor dies. This bank account is excluded from probate because it is not considered as property of the decedent when the decedent dies. The contents of the bank account automatically transfer to the surviving depositor.

Thus, if the parent opens a joint bank account with the child and the parent dies, the child receives the entire amount in the bank account as the surviving co-depositor. This can be problematic in a number of ways:

Fights among children

If the parent’s purpose of having the child is simply to help the parent with their financial transactions, having the child as a joint depositor will entitle the child to the entire contents of the bank account upon the parent’s death, causing problems with the other children.

Child predeceases parent

If the child predeceases the parent, one-half of the bank account goes to the estate of the child for estate tax purposes, even if the joint account is not subject to probate.

Gift tax consequences

If the parent adds the child as a joint depositor, one-half of the contents of the bank account will be considered a gift to the child. If half of the amount of the bank account is beyond $15,000 for a given year, it will be subject to gift tax. The child, who is the recipient of the gift, is liable for the payment of gift tax.

Income tax consequences

Income from the bank account may have to be reported either both by the child and the parent, split in half, or 100% by the parent in the parent’s income tax return. This amount is usually negligible for checking or savings accounts. However, in investment accounts, this amount may be substantial. Upon the death of a joint owner, the surviving owner will have to pay income taxes on the entire income received from the bank or investment account.

Contents of the bank account can be subject to the child’s creditors

If the child has creditors, for example, an unpaid student loan debt, the proceeds of the bank account can be attached by the child’s creditors for payment of such debt.

Because of these issues that could arise from adding a child to the parent’s bank account, getting advice from an estate lawyer will be helpful in structuring the transaction to attain the parent’s financial objectives. An estate lawyer may recommend the use of trusts, a financial power of attorney, and/or a transfer on death designation in the bank account in lieu of establishing a joint account.

Joint bank account for convenience only

Although New York Banking Law § 675 establishes a presumption of joint tenancy with rights of survivorship when joint owners open a bank account, this presumption can be rebutted by showing that the bank account was opened for the convenience of one account owner only. New York Banking Law § 678 provides the establishment of and defines a bank account for convenience.

In a joint bank account for convenience, there is no right of survivorship and the depositor shall not be considered to have made a gift of one-half of the deposit to the other person. Thus, when a parent opens a joint bank account with the child for convenience and the parent dies, the entire bank account is considered an asset of the parent’s estate and does not go to the joint co-depositor child.

Before the statutory presumption under New York Banking Law § 675 arises, evidence must be submitted to show that the joint owners intended to create a bank account of joint tenancy with rights of survivorship. This is usually proven by the signature card or ledger that creates the bank account. This signature card or ledger will usually include “words of survivorship.” Absence these “words of survivorship” in the signature card or ledger, no statutory presumption of joint tenancy with rights of survivorship is created with the bank account of two joint owners, and the joint bank account can be considered “for convenience” only.

In Matter of Najjar, 195 A.D.3d 1483 (2021), a child was a joint bank account owner with the parent on four bank accounts. When the parent died, the other children filed a case against the joint bank account owner-child. The child claimed that she was entitled to all the proceeds of the four bank accounts she jointly held with decedent, and these bank accounts were not part of the decedent’s estate, because they were a gift to her by her parent. The child, however, failed to submit the signature cards or ledgers of the accounts that included the required survivorship language. The other children, on the other hand, submitted evidence with respect to the three bank accounts, showing the decedent’s will that left such bank accounts with the three children, and the respondent’s testimony in the deposition that the three bank accounts were solely funded by decedent and that payments out of the account were made only for decedent’s benefit. Thus, the Court declared that issues of fact existed on whether these three bank accounts were in fact joint bank accounts for convenience only and denied the respondent’s motion to have all the bank accounts declared in her name as joint owner.

The Court held:

“Under Banking Law § 675, “[w]hen two or more persons open a bank account, making a deposit of cash, securities, or other property, a presumption of joint tenancy with right of survivorship arises” (Matter of New York Community Bank v Bank of Am., N.A., 169 AD3d 35, 38 [1st Dept 2019], lv denied 33 NY3d 908 [2019]). In order for that statutory presumption to apply, “words of survivorship must appear on the signature card or ledger that creates the bank account” (Matter of Camarda, 63 AD2d 837, 838 [4th Dept 1978], citing Matter of Fenelon, 262 NY 308 [1933], and Matter of Coddington, 56 AD2d 697 [3d Dept 1977]; see Matter of Grancaric, 91 AD3d 1104, 1105 [3d Dept 2012]; Matter of Costantino, 31 AD3d 1097, 1099 [4th Dept 2006]). Absent the necessary survivorship language, the statutory presumption contained in Banking Law § 675 does not apply, even if the documents creating the account provide that it is a “joint” account (see Matter of Randall, 176 AD2d 1219, 1219 [4th Dept 1991]; Matter of Coon, 148 AD2d 906, 907 [3d Dept 1989]). Here, on her motion, respondent failed to establish that the statutory presumption created under Banking Law § 675 is applicable because she failed to submit signature cards or ledgers of the accounts that included the required survivorship language.

Because respondent “could not invoke the statutory presumption, [she] had the burden of establishing that the [bank] accounts were joint tenancies or a gift entitling [her] to rights as the survivor” (Matter of Seidel, 134 AD2d 879, 880 [4th Dept 1987]). Respondent averred in an affidavit that decedent placed her name on the accounts with the stated intention of gifting them to her. Respondent also submitted related account documents, including bank documents for all four accounts that reference both respondent and decedent’s names and include survivorship or joint tenancy language. Thus, respondent submitted evidence establishing that the four accounts were joint accounts with right of survivorship, and the burden then shifted to petitioners.

In opposition to respondent’s motion with respect to the ESL Federal Credit Union account and the two KeyBank accounts, petitioners submitted decedent’s will, which left the estate to the three children. Thus, the intent of decedent, as evidenced by her will, is inconsistent with respondent’s contention that the three bank accounts were gifts to respondent or joint tenancies with survivorship rights (see Seidel, 134 AD2d at 880). Moreover, petitioners submitted respondent’s deposition testimony that those three accounts were funded solely by decedent, that one of the KeyBank accounts was used as decedent’s primary checking account, and that payments out of that account were for only decedent’s benefit. Further, respondent, who became joint owner of those three accounts when decedent was in her mid to late eighties, testified that she helped decedent with her banking. Therefore, we conclude that petitioners raised questions of fact whether the ESL Federal Credit Union account and the two KeyBank accounts were convenience accounts, and thus, contrary to respondent’s contention, the Surrogate properly denied respondent’s motion with respect to those three accounts.”

Given New York case law, one may still rebut the presumption of a joint bank account as joint tenancy with rights of survivorship. Many parents right now establish joint bank accounts with their children. When the parent dies, the child then claims sole ownership over the proceeds of the bank account, to the exclusion of the other children, resulting to protracted lawsuits.

Other options aside from a joint bank account with child

To avoid issues arising from joint bank accounts, the parent should explore other options, aside from making the child a joint owner of the bank account.

Transfer on death account

If the parent’s purpose is to give access to funds to the child upon death, a transfer on death designation will achieve this objective. When the parent dies, the bank account does not need to go through probate, and the child, who is designated as beneficiary, can access the account upon the parent’s death by submitting the parent’s death certificate, among other requirements the bank will ask for. This ensures that the child’s creditors will not have access to the bank account, and the child will not be subjected to gift tax. The parent can also name more than one beneficiary, and in fact, name all the children as beneficiaries, in the transfer on death account.

Financial power of attorney

If the parent’s purpose is to give the child access to the bank account for the purpose of helping the parent with the parent’s banking needs, such as making payments to utility providers, subscriptions, and mortgages, a financial power of attorney can help the parent achieve this objective. This financial power of attorney is a powerful document that allows the child to perform financial transactions on behalf of the parent. This allows the child, not only to perform bank transactions, but gives the child access to other accounts, such as IRAs and 401(k)s, and even the ability to sell real estate. Because of the power this document can give, it should be written by a lawyer and should state any limitations and instructions regarding the financial transactions.

When your sibling is claiming entitlement over the bank accounts of your parent as co-depositor or has cleaned out the bank account of your parents by virtue of being a joint bank account owner or by using a financial power of attorney, you need to take immediate steps to recover the money. A case should immediately be filed so you can recover the proceeds of the bank account. If needed, you should apply for a temporary restraining order and preliminary injunction to restrain your sibling from further using the bank account or to restrain the bank from further making transactions on your deceased parent’s bank account.

If you need legal representation, we at the Law Offices of Albert Goodwin are here for you. We have offices in New York, NY, Brooklyn, NY and Queens, NY. You can call us at 718-509-9774 or send us an email at attorneyalbertgoodwin@gmail.com.