Special Issues with Joint Bank Accounts During Probate

As we know, the probate process only deals with a decedent's probate property (see glossary).  A joint bank account will generally pass to the surviving account holder automatically without assistance from the probate process.  Example:  husband and wife are joint owners of a checking account.  Husband dies.  Wife becomes sole owner of the checking account automatically.  Additionally, an account such as a Pay on Death (P.O.D.) account will have a beneficiary designation that directs where the account will go, without the need for probate.

However, it is common for an elderly parent to add a child to the parent's bank account in order to have the child assist the parent in managing the parent's day-to-day finances.  This arrangement is helpful and convenient for the parent during life, but could cause problems upon the parent's death.  As it stands under this scenario, the bank account would pass to the child automatically without the need for probate.  But, what if the parent had other children?  What if the account was the only significant asset of the estate?  How would that affect the parent's distribution goals?

Even if there are multiple children, some people choose to let the account pass to the survivor, trusting the lone account-holder child to make fair distributions to the other children.  This plan can work well, but carries obvious risks and can include complications such as gift tax.

Depending on the circumstances, it may make sense to treat these accounts as either (a) joint tenancy accounts, or (b) “accounts of convenience.”  It may make sense just to treat the account as joint to avoid probate.  If the account is treated as for convenience, then the account will go through probate and be distributed according to the decedent's Will or the intestacy statutes.  The crucial fact is the parent's original intent in making the account joint.  If the parties can provide sufficient evidence that the account was for convenience purposes only, then the probate court will allow the account to proceed as a probate asset.  The requisite intent can be shown in numerous ways and from all sources of evidence.  One way is to originally (during life) use the forms contained in the Minnesota Multi-Party Accounts Act under Minn. Stat. § 524.6-213.

If you are considering creating such an account or adding a child to your account, it may make sense to have a quick consultation with an attorney to ensure that creating a joint account will not disturb your estate planning goals.