Financial accounts do not go through probate. They are non-probate assets.
The financial institution gives the money directly to the beneficiary named in the account.
Inheritance and Joint Accounts
When an account is set up, correctly, as a joint account with right of survivorship, and when both parties have the mental ability to contract, the bank pays the survivor the funds in the account. But what happens if the joint account is not set up properly?
Problem
Texas has strict rules about setting up joint accounts. Just because they are named a “joint account with right of survivorship” doesn’t mean they are recognized as such by Texas courts.
Facts
In 1998, L.D. Hare opened a checking account at Austin Bank…he added his son, Larry W. Hare, to the … account.
After a short hearing, the trial court found that the account should pass through probate because the evidence was insufficient to prove that the parties had created a joint account with the right of survivorship.
12-17-00062-CV.
Rules for Joint Accounts in Texas
The court set out the requirements for joint accounts with right of survivorship.
Ownership of funds held in a multiple party account after the death of a party is determined by statute. In essence, the requirements for the creation of a right of survivorship to a joint account are: 1) a written agreement, 2) signed by the decedent, 3) which specifies that his interest “survives” to the other party.
Here, the signature card constitutes a written agreement and it was signed by the decedent…Thus, the first two requirements for creation of a right of survivorship were met.
(T)he signature card is the only evidence presented in support of the existence of a right of survivorship. Although the card includes a notice provision warning that the type of account chosen may affect how property passes upon the death of an account holder, the notice is incomplete.
The signature card indicates an attempt to create a right of survivorship. However, no document was produced in evidence stating that the ownership interest of a deceased joint owner will belong to the surviving parties upon his death. Without such explanatory language, the agreement, whether in the form of a signature card or a different format, fails to confer a right of survivorship upon the surviving party.
Hare did not meet his burden to prove that the joint account holders created a right of survivorship in compliance with the Texas Estates Code.
Ruling
Based on the facts of the case and applying Texas law, the son did not meet his burden to show that the account was a joint account with right of survivorship. Because the burden was on him and he failed to meet that burden, he lost. The money from the account went to probate. There is no discussion of a will but if the decedent had a will, the money would be distributed according to the will. If there was no will, then it would be distributed according to the laws regarding Texas intestate succession.
Notes
The things to take away from this case are that the burden of proof is on the person claiming that the account was a joint account with right of survivorship and that Texas has strict rules involving joint accounts.
The Texas statutes include a form that financial institutions can use but most of them continue to use their own forms which may or may not be sufficient.
Everybody knows when you are dead, right? When the question involves when are you dead for probate purposes the answer is not quite so settled. I have written before on this question of when are you dead for probate purposes and those articles are cited at the bottom of this article.
Simultaneous Death Act
The question usually arises because Texas, as most states, has a statute that deals with survivorship when two people die around the same time. In Texas, if you die within 120 hours of another person you are presumed to have died at the same time. Usually when these statutes are invoked, the issue involves close family members like a husband and wife. If the husband and wife die close together in time, the state doesn’t want to require the children to have to file an estate for the father and then put his money into the mother’s estate and then open an estate for the mother and put her money into the estate of the father and then…. you can see the point. The issue is also important in joint accounts with right of survivorship. If the joint owners die close together, what happens to the money. The Simultaneous Death Act resolves that problem. One final issue is what happens when a will speaks to what happenes to the property if the testator and the main beneficiary die in a common disaster. Common disaster means (“[a]n event that causes two or more persons [with related property interests] . . . to die at very nearly the same time, with no way of determining the order of their deaths.”) This last issue relating to the definition of common disaster was the subject of a 2016 case out of the Texas Supreme Court. NO. 14-0406 consolidated with NO. 14-0407.
Facts
A husband murdered his wife at 8:59 PM and then shortly thereafter at 10:55 PM killed himself. They had nearly identical wills with provisions relating to what happens to their estate if they died in a “common disaster.” The issue before the court was whether or not these two people died in a common disaster? The trial court had ruled that they did die in a common disaster. The Court of Appeals agreed holding that the homicide-suicide was “a common disaster in spite of the fact that husband did not successfully kill himself immediately” because the shots that killed the husband and wife “were fired in one episode.” The Supreme Court however disagreed and ruled that the husband and wife did not die in a common disaster.
Construing A Will
The Supreme Court said that this was a case of construing a will, plain and simple. While the trial court and the Court of Appeals had discussed the Texas Simultaneous Death Act, the Supreme Court said that that act did not apply because the wills addressed the situation and had to be followed. The court stated that common disaster has a settled legal meaning. One of the requirements is that the order of death must be uncertain. In the case under review, there was no uncertainty as to the order of death. Common disaster fails to encompass unrelated but closely timed deaths. Therefore the doctrine of common disaster did not apply in this case. The provisions in the will dealing with what happens to the property if the husband and wife die in a common disaster never become effective.
In what I consider a strange holding, the Texas Supreme Court ruledin 2015 that when a Texas bank gives money to the wrong person, the bank may not be liable.
Facts
The case dealt with a joint account with right of survivorship. A husband and wife opened the account. The account was a joint account with right of survivorship meaning that when one died, the survivor owned the account. The account also had a pay on death clause that paid themoney to two people equally when the last of husband or wife died. When the bank heard that the husband died, they issued a check to the two pay on death beneficiaries instead of leaving the money in the account under the wife’s name. One of the pay on death beneficiaries (first) kept the money. The other one (second) put the money into an account for the wife. He also had a power of attorney for wife and demanded that the bank reimburse the wife for the money that had gone to the first one. The bank admitted the mistake and attempted, unsuccessfully, to get the money back from the first one. After the wife died, the executor of her estate (second) filed suit against the bank.
No Damages
A jury found that the bank breached its duty to wife but found that the wife suffered no damages. The trial court entered a judgment against the bank for the full amount given to the first one, called judgment notwithstanding the verdict, JNOV. The court of appeals upheld the judge’s JNOV. However, when the case went to the supreme court, they overturned it. The supreme court ruled that the estate suffered no damage because the one half of the original account would have gone to the first one if no changes had been made! This doesn’t address the issue of what would happen if the wife had all the money and decided to spend it or to put it into another account (as she had done after the funds were disbursed.) I don’t understand how the bank is not liable for giving depositor’s money away. There was no discussion of any constraint on the wife to use that money, to give it to someone else or to just go to Las Vegas and blow it. It was wife’s money! How could giving it to someone else not cause damages!
The only way to justify this case is that the two pay on death beneficiaries were not relatives of the husband and wife and that if the bank had paid the money back to wife, it would have ended up in the account opened by the second beneficiary after the fact and he would get all of the money. There is no discussion of these issues or what the wife’s wishes were. There is a brief mention of a guardian for wife but not discussion of what wife wanted done with the money.
In a 2014 case out of the Tyler Court of Appeals, the court decided a case involving life insurance proceeds between partners. Two men were partners in a business. They obtained life insurance policies on each other’s life for $2,000,000.00. When one partner died, the other partner decided to keep the two million dollars. The family of the deceased partner filed suit alleging that the life insurance policy was meant to go to the family of the deceased to buy out his interest in the company. The trial court ruled in favor of the living partner. The family appealed.
Who Owns the Life Insurance Proceeds
After reviewing the facts, the court of appeals agreed with the trial court and ruled against the family of the deceased partner. They noted that while there were discussions about the money being used to buy out the family, there was never any contract to do so. Even though the deceased partner may have had a subjective belief that the proceeds of the insurance policy would be given to his family, his state of mind was insufficient to show a valid contract. Since the living partner was the sole beneficiary under the insurance policy, he kept all the money. 12-12-00150-CV.
What Should Have Been Done
The family of the deceased partner believed that the partners had agreed to pay for the insurance policy to protect the family of a partner who died. Just because they believed that didn’t create a contract where none existed. The partners should have entered into a written contract to protect their families. With this much money involved, the partners could have afforded a competent attorney who could have advised them on the proper way to achieve their goals.
Yes you can, says the Amarillo Court of Appeals in a 2013 case. The court noted that it is not often that civil and criminal precepts collide in a criminal prosecution but this one was one of those cases.
A woman and her father-in-law opened a joint account. The money, about $200,000, belonged to the father-in-law. The woman took money out of the account and spent it for personal items. She claimed that she was a joint owner of the funds and had a right to withdraw them. The court, in upholding her sentence, said while under civil law she had the right to withdraw the funds that did not make them her funds. They still belonged to the father-in-law. When she spent the funds for personal items, she committed the crime of theft. 07-12-00435-CR.
In probate matters, joint accounts with right of survivorship are frequently at issue. Let’s assume that the decedent has a will that leaves everything to her two children. She also has an account in a bank. One of the children convinces mom that she can assist in caring for mom’s financial interest. Through habit or at the instructions of the daughter, the bank fills out the forms to convert the account to a joint account with right of survivorship. When mom dies, the will controls the disposition of mom’s property except for accounts in financial institutions such as bank accounts, retirement accounts, CD’s, etc. These are controlled by the beneficiary designation on the accounts. In the case of the joint bank account, the child on that account will often claim the whole account, “mom wanted me to have it all.” This often leads to litigation over the ownership of the account. As this case points out, just because you are listed on a joint account with right of survivorship doesn’t necessarily make the funds yours.
Copyright by Robert Ray a Texas inheritance attorney. The foregoing information is general in nature and does not apply to every fact situation. If you are concerned about inheritance laws, inheritance rights, have a family inheritance dispute, a property dispute or want information about contesting a will and need an inheritance lawyer, we can help. Please go to our main site www.texasinheritance.com and use the contact form to contact us today. We are Texas inheritance lawyers and would love to learn about your case and there is no fee for the initial consultation.
