Potential Pitfalls of Convenience Accounts

Potential Pitfalls of Convenience Accounts

By Jennifer F. Hillman*

Convenience accounts are frequently utilized to assist the elderly or infirm with their financial obligations.  The account holder will add an additional person to the account which gives them the ability to write checks, pay bills and perform other banking functions for the convenience of the account holder. 

However, the existence of two names on a bank account often leads to litigation after the account holder passes away, and it must be determined whether the account was a convenience account (whereby the balance will pass to the estate of the account holder) or whether it was intended to be a joint account with survivorship rights (whereby the balance of the proceeds will pass to the additional person on the account outside of the decedent's estate).

A recent decision by the New York Appellate Division Second Department illustrates how complex this question can become.  In Matter of Yaros, 90 A.D.3d 1063, 935 N.Y.S.2d 627 (2d Dep't 2011) [enhanced version available to lexis.com subscribers], the court reviewed the decision of the Surrogate's Court Queens County which denied a motion for summary judgment by petitioner who claimed she was the rightful owner of the proceeds of a specific bank account. 

The Court noted that under NY Banking Law Section 675, the deposit of funds into a joint account constitutes prima facie evidence of an intent to create a joint tenancy, however that presumption can be rebutted "by providing direct proof that no joint tenancy was intended or substantial circumstantial proof that the joint account had been opened for convenience only."  Matter of Richichi, 38 A.D.3d 558, 559, 832 N.Y.S.2d 57 (2d Dep't 2007) [enhanced version available to lexis.com subscribers]. 

The Court determined that the petitioner submitted evidence sufficient to rebut the statutory presumption that a joint account was created including: (i) that the petitioner had previously referred to the account as a "dual signature account" to "safeguard" her father's money; (ii) decedent was the sole depositor to the account; (iii) decedent's daughter never made a withdrawal; (iv) a joint account was a substantial deviation from the decedent's previously expressed testamentary plan; and (v) although the account stated it was a joint account, there was a requirement that both the decedent and the daughter were required to sign before payment or delivery of the property would be made. 

In opposition, the Court found there were triable issues of fact regarding the decedent's intent including the statutory presumption under the Banking Law, as well as the testimony of the bank employee who was present when the account was opened, and explained to the decedent the gift tax implications that he would incur and the implications of giving away half of his assets.  Accordingly, the Second Department affirmed the lower court's denial of summary judgment.    

Yaros and other similar cases highlight the negative impact of convenience accounts when they are not properly opened or utilized.  Before adding anyone to a bank account, an individual is well-advised to carefully review the account documents and otherwise make certain that their true intentions are reflected.           

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Jennifer F. Hillman is an attorney at Ruskin, Moscou Faltischek, P.C., Uniondale, New York where her practice focuses in the area of trust and estate litigation.  She can be reached at jhillman@rmfpc.com

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