Ownership of Joint Accounts vs. Will Expectations

Many times, upon the death of an account holder, issues arise as to who owns a joint account. The rules are straight-forward and are set forth in Pennsylvania’s “Multi-Party Account Act” (the “Act”). An important part of estate planning involves recognizing the results of joint ownership under the Act because, generally, the rules under the Act trump the gifts directed under a will.
A “joint account” carries with it a “right of survivorship.” This means that if A and B own an account jointly and A dies, B gets the account (all of it). This result occurs even if A has a will under which she gives all her property to C. The Act governs this result, even over the words of the will. There is a possible exception to this if A has put B on the account only as a “convenience” (i.e. A only meant to give B the ability to write checks on A’s behalf). However, the law presumes that joint accounts are not convenience accounts, so C would have a hard time winning that argument.
A second way for people to co-hold accounts is as “tenants in common.” If A and B hold the account as tenants in common, and A dies, her will does govern the disposition of her account and her share will go to C, the person named in her will. If this (less common) method of holding accounts is desired the parties should take steps to ensure that the account is actually titled as a tenants in common account on the financial institution’s books.
One final note, if, in the first scenario, B decides or (B and C agree) that the money should not be treated as a joint asset, B can “disclaim” his joint interest in the account, and the money would flow into A’s estate. This should be done within 9 months of death to prevent tax issues. This nine month deadline is important both for Pennsylvania Inheritance Tax purposes and to determine whether a federal Gift Tax return needs to be filed.
— Rod Fluck

Posted in Estates / Wills, Newsletters