Joint Tenancies — See You In Court!!

This is the first article of a series about Probate, estates, and related matters, especially issues which lead to contests or disputes. I hope that you will find the subjects interesting and helpful, and your suggestions and questions are always welcome.

The contests I see most often involve joint tenancies. While the same rules apply to real estate, stocks, bonds, and other assets, most disputes involve joint bank accounts. People have used joint bank accounts for two different purposes. One purpose was to make a gift to one joint tenant on the death of the other. Historically, that was the only result of a joint tenancy account. Over time, a second practice arose. One person would put one or more additional names on an account “for purposes of convenience” to assist with financial transactions or to do something other than making a gift. This practice was usually intended to avoid wills and Probate and was often nicknamed the “poor man’s Probate.”

Beginning in 1955, the Illinois Supreme and Appellate Courts began to acknowledge “convenience” accounts and to address the legal issues related to them. The basic law is now well-established. An instrument creating a joint account in compliance with the statutes presumably speaks the whole truth. In order to go behind the terms of the agreement, the one claiming adversely thereto has the burden of establishing by clear and convincing evidence that the gift was not intended. Evidence and lack of donative intent must focus upon or relate back to the time of creation of the joint tenancy. If the decedent possessed donative intent at the time of the creation of the joint tenancy, a subsequent change of mind is not sufficient to sever the joint tenancy.

A party attempting to overturn a joint tenancy (“contestant”) faces at least four hurdles. First, upon the death of one joint tenant, the presumption is that the account passes to the survivor. Unless there is sufficient evidence, that presumption cannot be overcome. Second, the contestant must find some way to avoid the Dead Man’s Act and the Hearsay Rule, both of which bar evidence of discussions or transactions with the decedent. Often, that prohibited evidence is the only evidence, and there is no way to prove the case without it (however, the Dead Man’s Act does not apply to Citation proceedings). Third, the burden of proof is by clear and convincing evidence. That is a significantly higher standard than preponderance of the evidence. Fourth, even if the contestant gets past the first three hurdles, every case turns on its specific facts, and the contestant must still prove his case. (In a later article, I will discuss in greater detail the Dead Man’s Act, the Hearsay Rule, and presumptions as they apply to Probate contests.)

If the contestant does get past those hurdles to a trial on the merits, the Courts have looked at numerous factors in determining whether the account was or was not established for convenience. Those include:

Whose money initially funded the account and was put into the account?
Who reported the income on the account for income tax purposes?
Whose Social Security Number is on the account?
Who made deposits and withdrawals to the account?
For whose benefit was money withdrawn and how was it used?
Who had possession of the passbook or other account evidence?
Was there a prior history of joint tenancy accounts between the parties or the decedent and other persons?
What is the relationship of the joint tenant to the decedent?
What did the decedent say when the accounts were created?
Did the decedent understand the ultimate effect of setting up the joint account? Did the decedent mistakenly think that money was to pass under his or her will?
What does the will say?
Is there a difference between those parties who were to take under the decedent’s will and those who will receive the assets of the joint account? If the parties are the same, are the amounts significantly different?
Without the joint funds, will there be sufficient money to pay the expenses of the administration of the estate and the decedent’s final bills?

This is not an exhaustive list, and any evidence that is probative and relevant would also bear on the decision of the Court.

Practical Suggestion 1: Litigating joint bank accounts can be extremely difficult and time-consuming with no sure way to predict the ultimate results. Before starting that kind of litigation on behalf of the estate or the contestant, thoroughly consider the law and the facts.

Practical Suggestion 2: This analysis applies to any joint asset contained in any estate or related to any estate or estate plan. (It also can apply to Totten trusts or other assets payable on death to another.) When you encounter a joint asset, ask the surviving joint tenant if he or she knows the decedent’s true intent. The majority of people will tell the truth and will still do what is right, regardless of the consequences. Otherwise, the law will decide, and that decision may or may not be what the decedent truly wanted or what is morally “right.”

Most Important Practical Suggestion : The best way to avoid these disputes is to address the issue while the testator is alive. When you sit down to do a will or trust for an individual, ask about joint tenancies. Are there any? If there are, what does the testator intend? Are they meant to be gifts, or are they for convenience only and meant to be part of the “pot”? Put the answer in the will or trust. Faced with a strong statement of the decedent’s intent, most Courts will have an easy time making the decision. The mere statement of that intent should also deter most litigation. However, remember that the issue of intent applies at the time the account was opened and cannot be “changed” later on. That being said, joint accounts can be treated as part of the estate in order to equalize total distributions.