The Frugal Widow

By Cary A. Lind

The Facts.

Mildred and Edward married in 1971, the second marriage for each. Mildred came into the marriage with significant money of her own from her first marriage and with her own house (later sold). Edward owned his home and had a small amount of money of his own. Mildred moved into Edward’s home, and it was transferred into joint tenancy (not an issue). For two or three months, Edward paid the household bills and ran short of money each month. Mildred, who had been a bookkeeper before the marriage, took over the couple’s financial management and established a budget. Mildred put her Social Security checks in her own accounts, and both she and Edward lived off his paychecks and later his Social Security and pension. Mildred always kept “her” money separate from “their” money. Every month, Mildred was able to put some of “their” money in the bank. With the double-digit interest rates in the 1980’s, all of the bank accounts did very well.

Over the years Edward and Mildred made significant gifts to Edward’s children and they still accumulated over $100,000.00 as of August, 1999. At that time, Edward and his children decided to do some estate planning. Mildred would not tell Edward where their accounts were, and when he located the right bank, she would not turn over to him any of the bank books or certificates of deposit. Demands were made by Edward’s attorney and were disregarded by Mildred. She believed that if Edward “found” the money, he would move out and leave her. She did not want him to go, and she continued to take care of him until he died.

Edward filed for divorce in December, 1999. The Court entered an Order directing Mildred to disclose the accounts in two weeks. She did not. Three weeks after that Order, Edward died. Edward’s substantial death benefit had long before been relinquished by Mildred in favor of Edward’s children. All of Edward’s other assets were also non-Probate, most held in joint tenancy with Mildred or held in trust accounts. Edward’s children opened a Probate estate for the sole purpose of recovering the money from Edward’s and Mildred’s joint accounts. Edward’s will left his estate to his children only. Mildred filed a renunciation of the Will and elected to take her 1/3 statutory share of Edward’s estate, which otherwise had no assets.

The Issues.

What happens to the joint tenancy accounts? The estate’s attorney argued as follows: At Edward’s death, he was trying to break the joint tenancies, but Mildred thwarted his efforts. Based upon Edward’s intent, the joint tenancies were severed, and Edward’s estate should get 1/2 of those accounts. Edward’s estate would have to repay Mildred for the funeral expenses, repay or pay directly Edward’s medical bills, and pay her her surviving spouse award. Starting with 1/2 of the joint accounts, we calculated that Mildred would ultimately owe approximately $20,000.00 to the estate out of the $105,000.00 in issue.

All those who think that analysis is correct, raise your hands!

All those who think Mildred wins because the accounts were still held in joint tenancy at Edward’s death, raise your hands!

The Answer.

The first answer is wrong. The second answer is right, but with a slight twist.

There are at least three different types of joint tenancies. A joint tenancy in securities requires both parties to act jointly in order to take any action with regard to the property. One party cannot sever the joint tenancy or affect ownership without the other. A joint tenancy in real estate can be severed by either party, and a tenancy in common results. Joint tenancy bank accounts are yet a different type. The account documents entered into between the depositors and the bank say that any joint tenant can take out all of the funds at any time. Since that is true, in the absence of divorce or some other legal basis, no party has any recourse against any other joint tenant, even if the accounts are totally emptied. In essence, there is a contract between joint depositors absolving the bank of liability and agreeing that each joint tenant has full access to the account. Where there was intent to establish the joint accounts at the time they were opened, it does not matter if a joint tenant later changes his or her mind as Edward did. Since Mildred could have emptied all of the joint accounts without Edward’s permission or knowledge, she cannot be held liable for keeping Edward from finding the accounts and preventing him from withdrawing the money. Thus, the accounts were Mildred’s.

Practical Suggestions.

  1. Had these accounts been in Edward’s name alone, Edward’s name as trustee, or otherwise payable on death to Mildred, the result would have been different, because Edward would have been the only account “owner.” In that case, Edward’s estate would have a good argument under these facts that all of those assets belong to his estate instead of to Mildred.
  2. Without stopping to research the issue, many of us would have taken the same position as Edward’s attorney, and we would have been wrong. Our clients should be told that when they set up a joint tenancy bank account, the other joint tenant can empty that account without permission and possibly without any recourse.

© 2000 by Cary A. Lind, all rights reserved.