PUTTING IT TOGETHER
Let’s look at how the law and rules on joint tenancy, fiduciary relationships, Dead-Man’s Act, the Hearsay Rule, and presumptions interrelate in an actual fact situation. Della Decedent sets up two bank accounts. Account A is an account in joint tenancy with Carla Crook, her cousin. Account B is in the name of Della payable on death (POD) to Carla. Bank accounts are used here for illustration, but the rules and analysis are the same for other kinds of property. Della has a Will which leaves all of her Estate to her only child, Vera Victim. These issues arise after Della’s death. A Court will usually decide the case on an asset-by-asset basis, and the results can be and are often split.
The presumption for Account A is that Della intended to make a gift of the account to Carla. If there is no other evidence, Carla wins. If there is enough admissible evidence that Della had a contrary intent when she first set up the account, the presumption “bursts,” and trial is held de novo with no presumption either way. Carla cannot testify to any transactions with or conversations between herself and Della unless the Estate “opens the door” by presenting testimony of specific incidents. Without Carla’s direct testimony, she will likely lose.
The presumption for Account B is also that Della intended to make a gift of the account upon her death. However, a POD account is rarely set up “for convenience,” since the decedent has full control over the account while she is alive and the beneficiary has no rights in the account until the owner dies. If there is no other evidence, Carla wins. Even with other evidence, Carla will still probably win.
Now assume that Carla is acting as a fiduciary for Della pursuant to a property power of attorney or as otherwise established. If the bank accounts were set up prior to the date the fiduciary relationship arose, the results would be the same, since Carla did not take any action to benefit herself during the time she stood in a fiduciary relationship towards Della.
However, what if the fiduciary relationship was established first, and then Account A was set up by Carla? Assume also that Della herself signed documents setting up the account. After Della dies, there is no admissible testimony as to Della’s intent, and a peculiar situation results. On the one hand, because Account A was a joint account, the presumption is that Della intended the account to be a gift to Carla, and Carla wins. On the other hand, because Carla benefited from an account established during the time Carla was a fiduciary for Della, the presumption is one of fraud which Carla cannot rebut, and Vera wins. What happens when the Court is faced with “dueling presumptions”? The Fourth District Appellate Court was faced with that exact question in Estate of Rybolt. The Court acknowledged that it had “an interesting conflict of presumptions in this case.” That Court said:
We conclude the facts here require strong evidence to overcome the presumption of fraud. As more of our population become aged, more will need financial assistance. Unfortunately, greed and the temptation to benefit oneself will exist. If the presumption of fraud can be offset by a presumption of donative intent through joint tenancy with right of survivorship, then greed will often win out. We deem it necessary to hold in this case that the presumption of donative intent was outweighed by the presumption of fraud–that presumption requiring more evidence to overcome.
Thus, under our facts, Vera wins. Other districts have adopted Rybolt’s reasoning.
A similar analysis will apply to other variations of these facts. For example, if there is a three-way joint tenancy and one of the names is “removed” to the benefit of the fiduciary, that is a breach of fiduciary duty. If “new” money is added to pre-existing accounts to the fiduciary’s benefit, it is a breach of fiduciary duty. In some cases, the party benefiting may not be the actual “fiduciary,” but two or more people may act in concert or conspiracy.
In general, a Court will look at the assets before the fiduciary relationship arose and at the date of death and will review the Decedent’s testamentary plan. Where there are significant deviations from the Decedent’s intent and where the fiduciary is involved in benefiting herself or her cohorts, a Court is more likely to act. While the law is clear, each case turns on its particular facts in light of the evidentiary rules and probably the applicable presumptions.
© 1999 by Cary A. Lind, all rights reserved.