Joint Account Basics
By Miles Pringle
Jointly owned deposit accounts have been an ever-present part of banking since before Oklahoma became a state. You likely have opened a joint account with your parent or spouse, or even recommended that a client use a joint account.
This article is intended to alert readers to some of the issues involved with joint accounts. To begin, in Oklahoma there is a presumption that all joint owners are joint tenants, and any one account holder is presumed to have access to all account funds.1 Typically, the instrument creating the account, e.g. account agreement, is between the bank and account owners and sets out the specific terms of the account.
Account owners should be aware that adding joint owners may subject account funds to garnishment or other collection attempts by the creditors of another joint owner. A joint owner may fight a collection attempt, because Oklahoma courts have ruled that the “creditor cannot reach any farther than the debtor could. The debtor should thus be allowed to prove the extent of his equitable interest in the joint account.”2 However, those fights may be difficult to win because the burden of proof is on the joint account owner fighting the collection attempt. A written agreement is one method of evidencing the interests between the account owners. It is important in these cases to respond and object promptly after receiving notification of any collection attempt.
Family law attorneys are well aware of issues raised by joint accounts. Adding a spouse as a joint owner may put previously separate funds into the marital estate via gift. For example, in Beale v. Beale, the husband voluntarily added his “wife’s name to certain of his premarital banking and investment accounts, which prior to the marriage had been held in his name only. Husband also opened several new accounts in both names, and purchased a certificate of deposit in both names.”3 In reviewing the case, the Oklahoma Supreme Court noted that “[n]ormally in dealing with marital property the issue of whether the accounts were held in joint tenancy, tenancy in common, or in the name of one spouse is not an issue.” The court held that the husband’s actions constituted a gift in relation to some, but not all, of the accounts explaining that the “Wife proved Husband placed three of those accounts into joint tenancy with her, thus creating the presumption of a gift. Further, we find Husband failed to rebut the presumption that an interspousal gift occurred by clear and convincing evidence in two out of three of those instances, and the following accounts therefore became joint marital property subject to an equitable division.”
Joint accounts are often used in connection with estate planning in Oklahoma, because joint tenancies are presumed to contain the right of survivorship.4 Thus, when a joint account owner dies, the decedent’s interest in the account passes with the decedent, and the remaining joint owners retain their interests in the account. The funds – generally – do not become a part of a decedent’s estate, and do not become subject to the laws of wills or intestacy. In reviewing these issues, the Oklahoma Supreme Court has flatly stated “the surviving joint tenant, is the owner of the account.”5 For example, in Henderson v. Krumsiek the deceased converted her account into a joint account between herself and her nephew with right of survivorship.6 Thereafter, the deceased executed a will leaving all her of personal property to her husband, and specifically included the bank account on a list of her personal property. The court held that the nephew was the proper owner of the account, and affirmed the trial court’s ruling stating “that the will did not destroy or suspend the previously contractual obligation created in the joint tenancy.”
Do not rely on the bank to help monitor the proper use of a joint account. In general, there is no duty for financial institutions to monitor accounts between joint account owners. The relationship between a financial institution and its customers is a debtor-creditor one, and not a fiduciary relationship.7 Additionally, the account agreements usually set out that all joint owners may access all account funds. Thus, without additional facts, the financial institution will not be liable for a joint owner’s misappropriation of account funds to another joint owner. If a dispute arises, typically the financial institution will interplead the funds and let the account owners fight it out amongst themselves.
Given the amount of control that joint owners have over account funds, they can be used as a vehicle for financial exploitation, even elder abuse. Under the Protective Services for Vulnerable Adults Act, “exploitation” is defined as the “unjust or improper use of the resources of a vulnerable adult for the profit or advantage, pecuniary or otherwise, of a person other than the vulnerable adult through the use of undue influence, coercion, harassment, duress, deception, false representation or false pretense.” Any person, including a financial institution or attorney, that has reasonable cause to believe that a vulnerable adult is suffering from abuse, neglect or exploitation, must report its suspicion to the Department of Human Services, or local law enforcement.
For example, a case in Arizona arose when a caretaker’s son tried to have himself named conservator and guardian over his then 91-year-old mother.8 His mother responded by filing a petition against the son claiming elder abuse. One of the allegations was that funds held in a joint account were misused, and “in a series of transactions, the ever-diminishing money was moved between accounts and/or institutions at least three times.” The appellate court upheld a ruling in the mother’s favor, and also awarded attorneys’ fees to her. It should be noted that a joint tenancy may be rebutted if it is proven that the joint tenancy was created through fraud.9 In such circumstances, a court may apply a constructive trust to trace funds from the perpetrator of the fraud.
There are other options to a joint account, such as making someone an authorized signor on an account. This avoids the presumption of a joint tenancy while allowing the signor to access account funds. If a dispute arises between the two, the account owner may remove the authorized signor, because the signor has no ownership interest in the account. However if the intent is to avoid probate, this would not accomplish that goal. Thus, a joint account may be beneficial in many circumstances, but owners should beware of potential consequences of holding funds jointly.
ABOUT THE AUTHOR
Miles Pringle is partner with Pringle & Pringle PC, where he represents clients in a variety of business matters, including financial institutions. He is a native Oklahoman, licensed to practice law in Missouri, Oklahoma and Texas. Mr. Pringle currently serves as chairperson for the OBA’s Financial Institution and Commercial Law Section.
1. Sears, Roebuck & Co. v. Cosey, 2002 OK CIV APP 39, ¶11, 44 P.3d 582, 584.
2. Baker v. Baker, 1985 OK CIV APP 35, ¶23, 710 P.2d 129, 134.
3. Beale v. Beale, 2003 OK CIV APP 90, 78 P.3d 973.
4. Romine v. Pense (In re Estate of Metz), 2011 OK 26, ¶6, 256 P.3d 45, 48-49 (“While the statute does not expressly employ the term ‘survivorship,’ this court has historically held that the legislature intended this well-defined common law term as a characteristic of joint tenancies, because the common law may not be abrogated by implication”).
5. Id. 2011 OK at ¶15.
6. 1969 OK CIV APP 13, ¶7, 463 P.2d 337, 338.
7. First Nat’l Bank & Tr. Co. v. Kissee, 1993 OK 96, ¶32, 859 P.2d 502, 510 (“Oklahoma recognizes the common law rule that the relationship between a bank and its customer is not fiduciary in nature, but is that of creditor-debtor.”).
8. Yamamoto v. Kercsmar & Feltus, PLLC, No. 1 CA-CV 14-0580, 2016 Ariz. App. Unpub. LEXIS 473 (Ct. App. April 19, 2016).
9. Alexander v. Alexander, 1975 OK 101, ¶12, 538 P.2d 200, 203.
Originally published in the Oklahoma Bar Journal -- OBJ 89 pg. 32 (February 2018)