In Illinois today, banking customers have only one choice in opening a multi-party bank account – a joint account with right of survivorship. This account type is well suited for a husband and wife because they generally intend mutual access to the account during their lifetimes and if one of them should die, the other has a survivorship right in the account.2 However, joint accounts are frequently used in other situations where the expectations and purposes are quite different from that of a traditional married couple.3 Unfortunately, the limited option of a joint account with right of survivorship does not fill the needs of many banking customers, especially the elderly.4 Most commonly, the elderly have an account of their own, but as they age, feel the need to add someone to the account to assist them with paying essential expenses if they should fall ill.5 Sometimes the person added to the account is an adult child, but other times it can be a more distant relative or a neighbor.6 Regardless of the relationship to the original depositor, the added party has a right to the funds in the account both immediately and upon the depositor’s death.7
In Illinois, a joint account with right of survivorship presumes that a depositor who adds a name and creates a joint account has donative intent and is thereby making a gift of the funds in the account.8 This holds true even while the account holder is alive: there is both a presumption of immediate possessory rights for the additional named person, as well as the presumption that all funds in the account belong to the survivor upon either of their deaths.9 The only way to rebut the presumption of donative intent is to introduce evidence of a contrary intent at the time the account was opened.10 In addition, the operation of the joint tenancy account with right of survivorship supersedes any last will or testament the deceased may have made.11 This can create a “legal minefield”12 and, needless to say, this has been the source of a steady stream of litigation over the years, with much of the case law being settled in the 1960’s.
However, there are other options. The first is a statutorily created convenience account.13 A statutory convenience account allows a depositor to set up an account in their name and another person’s name for convenience only and the additional name has no effect on the title of the deposits.14 In addition, when the depositor dies, the bank turns the funds over to the executor or administrator of the deceased depositor’s estate.15 Another alternative is found in Article VI of the Uniform Probate Code, which addresses multi-party bank accounts.16 When a jurisdiction adopts this part of the Uniform Probate Code, a multi-party bank account can exist with or without a right of survivorship,17 allowing the account to be used for convenience only.
This article will explore how the joint account with right of survivorship has created problems and abuses of the elderly customers who try to use them for convenience. The two types of legislation other states have adopted to address the problem of the joint account being used for other purposes will be analyzed, reviewed and recommended.
The Problems and Potential Abuses of Joint Accounts with Right of Survivorship. To fully understand why the joint tenant with right of survivorship account creates so many problems, one must look at the numerous ways it can be and has been abused.18 For example, an aging mother added her son’s name to her bank account when she became forgetful and her eyesight began to fail.19 The son subsequently took out a business loan for an unrelated business venture.20 Later, when his business failed and he defaulted on his loan, the bank was able to apply the money in the mother’s account toward her son’s indebtedness.21 She lost her life savings simply because she added his name as a convenience to help her pay her bills.22 Similarly, if the son made an error on his tax return resulting in the IRS filing a tax levy, the mother’s funds may vanish to satisfy that debt,23 even if she owes the IRS nothing.24 If the son is involved in a car accident and a judgment is entered against him in excess of his insurance, the plaintiff can freeze the mother’s funds so they can be used to satisfy the judgment.25 Should the son file for bankruptcy, the bankruptcy trustee can file a claim at the bank and attempt to confiscate the mother’s account.26 If the son becomes ill and cannot pay his medical bills, the hospital can garnish the account and capture the mother’s funds.27 Lastly, if the son is dishonest, he can convert the funds for his own use while his mother is still alive.28 Because Illinois law presumes that a depositor has made a present gift of the funds in the account,29 the dishonest son has a legal right to withdraw the funds if he so chooses.30
Determining Post-Mortem Intentions of the Decedent are Unpredictable. While all of the above joint account scenarios are horrible, at least the original depositor, the mother, would still be alive to mount a battle for her hard-earned money. She may or may not win; nevertheless she would be able to speak for herself. Unfortunately, however, most joint account litigation occurs after the original depositor dies, leaving the court to determine his or her intentions. The helpful and good-intentioned children, neighbors, or friends of the deceased depositor are now faced with a moral dilemma: legally, there is a presumption in their favor that all the money in the joint account is theirs, yet the temptation to claim the account was a gift and not a convenience often overwhelms them.31 Even though there is a presumption of donative intent when a joint account is established in Illinois, parol evidence may be introduced to rebut the presumption.32 Essentially, this leaves every joint account open to potential litigation after one account holder dies. The results have created much confusion in the Illinois courts, as well as courts around the country.33 The Ohio Supreme Court said the following about joint account with right of survivorship litigation in Wright v. Bloom:
[O]ur efforts to determine survivorship rights by a post-mortem evaluation of extrinsic evidence of depositor intent are flawed to the point of offering no predictability. Regardless of the depositor’s true motivation in opening a joint and survivorship account, he or she simply cannot be certain of how his or her lifetime actions will be construed in regard to transferring survivorship rights.34
The Wright court acknowledged that people opened joint accounts with right of survivorship for two reasons: as a convenience, or as a testamentary disposition.35 The problem is that the statutory language of joint accounts with right of survivorship makes no allowance for a convenience account.36 Essentially, when a joint account is opened for convenience purposes, Illinois forces people into an arrangement that does not accurately reflect their agreement. This flaw was recognized by the U.S. Court of Appeals:
It should be remembered too that a writing which is called a contract is merely a memorial of the parties’ agreement. It is simply evidence of the agreement and, if it is clear that it does not accurately reflect what the parties had agreed upon, monstrous injustice would be done by forcing upon them a contract which they had not actually made. As a consequence, the exception to the parol evidence rule to which we have referred permits inquiry into the real purpose of the parties and, if necessary, amendment of the writing to accomplish that purpose.37
Based upon the above analysis, Illinois imposes a “monstrous injustice” upon its citizens every time a joint account is opened for convenience.38 The injustice can only be corrected if the decedent’s estate takes action against the joint account holder and if the court hearing the action allows parol evidence to be introduced.
In Illinois, the right of survivorship and the prima facie presumption of donative intent attach to all joint accounts immediately,39 and this presumption can only be rebutted by clear and convincing evidence.40 The court also requires the examination of the intent at the time of the creation of the account,41 as opposed to any later intent that may have been expressed orally or by will. As a result, testimony that a decedent had changed his or her mind and attempted to sever the joint tenancy by means of a letter to the bank is not enough to rebut the presumption of donative intent.42 While the court has acknowledged that the donative intent is rebutted in an account created for the convenience of the decedent,43 the court has made it exceedingly difficult for the estate to show the account was established for convenience purposes.
The Illinois Supreme Court ruling in Murgic v. Granite City Trust & Savings Bank is still the most cited authority on joint accounts, with the assertion that the joint account agreement speaks the whole truth.44 However, the Second District Appellate Court read that holding more narrowly in In re Estate Shea.45 The Shea court interpreted that to also mean if there was incontrovertible evidence that the joint tenants had terms to their arrangement in addition to or different than those in the joint account agreement, the presumption that the joint account agreement speaks the whole truth is defeated.46 The Shea court held that first there is a burden to provide conclusive evidence that an additional agreement deviated or altered the ownership provided for in the basic joint account agreement.47 The second burden is to show that the estate is entitled to the money in the account,48 and an additional factor was added: how the account was actually used as evidence of the intent.49 If a joint account holder only used the account to write checks for the decedent’s expenses, such use would tend to show the intent of a convenience account.50
Use of the Joint Account with Right of Survivorship as a Testamentary Disposition. Part of the reason the Illinois courts have made joint accounts with right of survivorship so difficult to refute is the notion that the joint account is a reasonable method of testamentary disposition.51 “The legislative policy to treat the joint account as a useful technique for transferring intangibles dictates” the need for stringent burdens on the party claiming against the surviving joint tenant.52 Unfortunately, there is a lack of public awareness of the full power of the joint account with right of survivorship.53 Even if a decedent’s will names the account in question and specifically bequests the account to someone other than the joint account holder, the joint account holder will prevail.54 The legal effects of a properly established joint tenancy account cannot be changed by will55 because the common law theory of joint tenancy says that the first dying joint tenant has no interest which can be devised.56
Much of this could be avoided if the decedent knew the full ramifications of the joint account with right of survivorship.57 Frequently, however, banks do not explain the significance of the right of survivorship, or conversely, they advise their clients that this is an effective method of disposition of their estate.58
How Other States Have Dealt With the Joint Account Confusion. Other states have dealt with the joint account with right of survivorship litigation overload59 in two ways. Some have adopted part two of the Uniform Non-Probate Transfers on Death Act.60 The prefatory note of the act states that it is designed to comprehensively cover the problems of bank accounts in which one or more parties have an interest.61 In addition, the act gives recognition to the fact that a depositor may add another party to their account for a variety of reasons, including passing money at death to the other person, lifetime ownership by both parties, or enabling convenient account transactions by a person acting as an agent for the depositor.62 Part two of the act allows the funds in a multiple-party account to be owned in proportion to each person’s net contributions to the account.63 If one person makes all of the deposit contributions to the account, that party owns all of the deposits, even if another party is on the account title.64 There is no assumption that there is an intention to make a present gift by opening an account in two names.65
The act also allows for multiple-party accounts to exist with no right of survivorship.66 A multiple-party account can be designated to pass as part of the decedent’s estate or to the surviving account holder.67 The suggested form includes an agency designation which states “[a]gents make account transactions for parties but have no ownership or rights at death unless named as POD (pay on death) beneficiaries.”68 More than one agency designation is allowed and the agency designation can either survive or terminate upon the disability or incapacity of the parties.69
While the Uniform Probate Code adds statutory options for multi-party accounts that do not create a present ownership interest or rights of survivorship, the Code does not address bank conduct.70 If consumers have viable options, but do not understand them or are not told of them, the legislation may not be as effective as it could be.71 Promulgation and publication of regulations and required disclosures setting forth what information should be imparted by the banks to their patrons is necessary to reduce the litigation over joint accounts.72
Other states that have recognized the joint account problems have adopted their own banking legislation.73 New York recognized that there was a great deal of litigation over whether or not joint accounts were intended as true joint accounts with rights of survivorship or merely as convenience accounts.74 Similar to Illinois law, New York law imposes a presumption that the creation of a joint account indicates an intention to create a right of survivorship.75 As in Illinois, the prima facie presumption is only defeated with evidence that there was some other intention.76 Upon the recommendation of The Surrogates Association, the Trusts and Estates Section of the New York State Bar Association and others, the New York Legislature agreed that there should be legislation to differentiate between a true joint bank account with right of survivorship and a convenience account.77 Convenience accounts were statutorily created when the Legislature enacted Section 678 of the Banking Law.78 In order to give banks guidelines as to the information to be given to bank customers, the banking board promulgated regulations for the banks, to ensure that both the account opener and the additionally named party were being given the correct information.79 This section of the law requires banks to inform the depositor of the terms and conditions of the convenience account, including the relationship and consequences between the parties in such an account, and the difference between a convenience account and a joint account.80
Disclosure Regulations are the Key to Successful Im-plementation of New Account Option Legislation. Illinois can address the inherent problems with joint accounts by passing a statute to provide for a convenience account, as New York has done,81 or by adopting article six, part two of the Uniform Probate Code, as has been done by ten jurisdictions, along with regulations for bank disclosures.82
The most important part of allowing accounts to be established in two names without a right of survivorship or co-ownership is making sure the banks are able to effectively explain the options to their customers. A small empirical sampling which was conducted for this article indicated that a large number of customers may be receiving misinformation and incorrect advice from bank employees as to the consequences of adding a name to their account for convenience.83 New York has attempted to address this with regulations that accompany their convenience account legislation.84 These regulations set forth definitions of joint accounts and convenience accounts and identify the legal owner of each account type.85 Next, the regulations require banks to furnish a written notice to each owner named in every joint or convenience account, which must include required disclosures.86 The regulations proceed to set forth the required disclosures, which outline the rights and responsibilities of each party when they are either the owner or named party on a joint or convenience account.87
Comprehensive regulations and disclosures are essential to implementing a plan to reduce the joint account litigation.88 The banks compliance with the regulations is the most critical factor in successful legislation.89 This goal can be achieved by simple, well-written mandatory disclosures that will inform bank patrons of the legal consequences of the two types of accounts. In addition, mandatory disclosures will eliminate the misinformation that may be currently given by bank employees. Customers will no longer be forced to rely on the bank employee’s understanding of the law.
Illinois Can Make Changes to Adequately Protect the Elderly. Law is dynamic and concepts change with the reasons and needs of the people. The legislature has recognized the difficulty of the courts in dealing with joint accounts and has by statute provided a means by which uniformity and stability may be accomplished for the advantage of all.”90 This statement was made 45 years ago, and at the time, joint tenancy in a bank account controlled by statute was a step in the right direction. But again, the law and concept of the joint account should change with the needs of the people. A single option for a bank account with two names on it no longer meets the needs of the people or addresses the reasons these accounts are opened. It is essential that elderly people have the ability to enlist the help of others when they need assistance with their finances without opening themselves up to the myriad of negative consequences associated with the creation of a joint account with right of survivorship.91 Illinois courts also need to be freed from the cumbersome litigation of estates trying to prove by extrinsic evidence that a joint account was actually intended to be a convenience account. The Uniform Probate Code addresses the need for additional multi-party account options, however, it does not address the potentially erroneous information disseminated by bank employees. New York law has effectively addressed both issues: it allows a statutory convenience account and ensures that customers are given correct information regarding the legal ramifications of the different account types.92 By adopting legislation similar to New York, Illinois can effectively address the abundance of joint account litigation that overloads the court system, and simultaneously add protection for the elderly from financial abuse. The statutorily created convenience account is the next step forward for Illinois in responding to the changing needs of its citizens.
2 Jan M. Rosen, Joint Ownership: Cons Top Pros, N.Y. Times, Nov. 5, 1988, Your Money.
7 765 Ill. comp. stat. Ann. 1005/2(a) (West 2004).
8 765 Ill. comp. stat. Ann. 1005/2(a) (West 2004).
10 In re Estate of Anderson, 69 Ill. App. 2d 352, 366, 217 N.E.2d 444, 451 (1st Dist. 1966).
11 48A C.J.S. Joint Tenancy §3 (2007).
12 Jan M. Rosen, Joint Ownership: Cons Top Pros, N.Y. Times, Nov. 5, 1988, Your Money.
13 N.Y. Banking Law § 678 (McKinney 2003).
16 Uniform Probate Code §6-201, et seq. (2006).
17 Uniform Probate Code §6-203(a) (2006).
18 N.Y. Banking Law § 678 (McKinney 2003).
19 Simpson v. Ga. State Bank, 283 S.E.2d 278, 279 (Ga. Ct. App. 1981).
23 See U.S. v. Nat’l Bank of Commerce, 472 U.S. 713, 725 (1985).
25 See Fairfax v. Sav. Bank of Baltimore, 199 A. 872, 874 (Md. 1938).
26 See Matter of Overton, 169 B.R. 196 (D. Neb. 1994).
27 See Maloy v. Stuttgart Mem’l Hosp., 872 S.W.2d 401 (Ark. 1994).
28 See Lee v. Yang, 111 Cal. App. 4th 481 (Ca. 1st Dist. 2003).
29 In re Estate of Shea, 364 Ill. App. 3d 963, 848 N.E.2d 185, 187 (2d Dist. 2006).
30 See Rasmusssen v. LaMagdelaine, 208 Ill. App. 3d 95, 566 N.E.2d 864(2d Dist. 1991).
31 See generally In re Estate of Schroeder, 74 Ill. App. 3d 690, 393 N.E.2d 1128 (1st Dist. 1979); In re Estate of Schneider, 2 Ill. App. 2d 560, 120 N.E.2d 353(1 Dist. 1954).
32 Murgic v. Granite City Trust & Savings Bank, 31 Ill. 2d 587, 202 N.E.2d 470, 472 (1964).
33 In re Estate Vollmer, 45 Ill. App. 2d 94, 195 N.E.2d 44 (2d Dist. 1963). But see Barber v. Ruth, 7 F.3d 636 (7th Cir. 1993).
34 Wright v. Bloom, 635 N.E.2d 31, 37 (Ohio 1994).
35 Id at 33.
36 765 Ill. comp. stat. Ann. 1005/2(a) (West 2004).
37 Murray v. Gadsden, 197 F.2d 194, 202-03(D.C. Cir. 1952).
38 See Murray v. Gadsden, 197 F.2d 194, 202-03(D.C. Cir. 1952).
39 Frey v. Wubbena, 26 Ill. 2d 62, 185 N.E.2d 850, 853 (1962).
40 Murgic v. Granite City Trust & Savings Bank, 31 Ill. 2d 587, 202 N.E.2d 470, 472 (1964).
42 In re Estate Marx, 11 Ill. App. 3d 727, 297 N.E.2d 637, 638 (1st Dist. 1973).
44 Murgic v. Granite City Trust & Savings Bank, 31 Ill. 2d 587, 202 N.E.2d 470, 472 (1964).
45 In re Estate Shea, 364 Ill. App. 3d 963, 848 N.E.2d 185, 192 (2d Dist. 2006).
49 Id at 193.
51 In re Estate Shea, 364 Ill. App. 3d 963, 848 N.E.2d 185, 192 (2d Dist. 2006).
52 Murgic v. Granite City Trust & Savings Bank, 31 Ill. 2d 587, 202 N.E.2d 470, 472 (1964).
53 Jan M. Rosen, Joint Ownership: Cons Top Pros, N.Y. Times, Nov. 5, 1988, Your Money. (Millard L. Midonick, counsel, Willkie Farr & Gallagher and a former surrogate of New York County, said at a conference on financial, estate and tax planning, “I am sad to report that almost 100 percent of depositors do not understand the nature or legal consequences of depositing money in joint bank accounts.” ).
54 In re Estate Anderson, 69 Ill. App. 2d 352, 217 N.E.2d 444, 451 (1966).
56 Eckardt v. Osborne, 338 Ill. 611, 170 N.E. 774, 775 (1930).
57 Hon. C. R. Radigan, Joint Bank Accounts vs. Convenience Accounts, N.Y. St. B. J., Mar./Apr. 1996, at 54.
60 Ala. Code §§ 5-24-1 to 5-24-34 (1997); Alaska Stat §§ 13.33.101 to 13.33.310 (2008); Ariz. Rev. Stat. Ann. §§ 14-6101 to 14-6311 (1995); Colo. Rev. Stat. Ann. §§ 15-15-101 to 15-15-311 (2006); D.C. Code Ann. §§ 19-602.01 to 19-603.11 (2001); Fla. Stat. Ann. § 655.82 (2001); Mont. Code Ann. §§ 72-6-111 to 72-6-311 (2007); Neb. Rev. Stat. Ann. §§ 30-2715 to 30-2746 (1993); N.M. Stat. Ann. §§ 45-6-101 to 45-6-311 (2005); N.D. Cent. Code §§ 30.1-31-01 to 30.1-31-30 (1991).
61 Uniform Nonprobate Transfers on Death Act 1991 References & Annotations Prefatory Note.
66 Uniform Nonprobate Transfers on Death Act 1991 References & Annotations Prefatory Note.
68 See, e.g., Colo. Rev. Stat. Ann. § 15-15-204 (2006); Fla. Stat. Ann. § 655.82 (2001), Uniform Probate Code §6-204 (2006).
70 Uniform Nonprobate Transfers on Death Act 1991 References & Annotations Prefatory Note.
71 Hon. C. R. Radigan, Joint Bank Accounts vs. Convenience Accounts, N.Y. St. B. J., Mar./Apr. 1996, at 54.
73 See, e.g., N.Y. Banking Law § 678 (McKinney 2003) and Cal. Prob. Code §5100 et seq. (1991).
74 N.Y. Banking Law § 678 (McKinney 2003).
75 N.Y. Banking Law § 675 (McKinney 2003).
76 Hon. C. R. Radigan, Joint Bank Accounts vs. Convenience Accounts, N.Y. St. B. J., Mar./Apr. 1996, at 54.
78 Id. See N.Y. Banking Law § 678 (McKinney 2003).
79 N.Y. Banking Law § 678 (McKinney 2003).
82 Ala. Code §§ 5-24-1 to 5-24-34 (1997); Alaska Stat §§ 13.33.101 to 13.33.310 (2008); Ariz. Rev. Stat. Ann. §§ 14-6101 to 14-6311 (1995); Colo. Rev. Stat. Ann. §§ 15-15-101 to 15-15-311 (2006); D.C. Code Ann. §§ 19-602.01 to 19-603.11 (2001); Fla. Stat. Ann. § 655.82 (2001); Mont. Code Ann. §§ 72-6-111 to 72-6-311 (2007); Neb. Rev. Stat. Ann. §§ 30-2715 to 30-2746 (1993); N.M. Stat. Ann. §§ 45-6-101 to 45-6-311 (2005); N.D. Cent. Code §§ 30.1-31-01 to 30.1-31-30 (1991).
83 Four National Bank branches were visited to open up a joint account for convenience purposes. Three of four Bank Representatives gave erroneous information as to how a joint account works and what happens to the money when the depositor dies.
84 N.Y. Comp. Codes R. & Regs. tit. 3, § 15.1 – 15.4 (1991).
85 N.Y. Comp. Codes R. & Regs. tit. 3, § 15.1 (1991).
86 N.Y. Comp. Codes R. & Regs. tit. 3, § 15.2 (1991).
87 N.Y. Comp. Codes R. & Regs. tit. 3, § 15.3 Disclosures (1991).
88 Hon. C. R. Radigan, Joint Bank Accounts vs. Convenience Accounts, N.Y. St. B. J., Mar./Apr. 1996, at 54.
90 In re Estate Vollmer, 45 Ill. App. 2d 94, 195 N.E.2d 44, 47 (2d Dist. 1963).
91 Jan M. Rosen, Joint Ownership: Cons Top Pros, N.Y. Times, Nov. 5, 1988, Your Money.
92 N.Y. Banking Law § 678 (McKinney 2003) and N.Y. Comp. Codes R. & Regs. tit. 3, § 15.4 (1991).
Sheri Brown is a third-year law student at Northern Illinois University College of Law. She is on the Editorial Staff of the Law Review and recipient of the Academic Excellence Scholarship. She graduated from the University of Illinois Champaign in 1990 with a B.A. in International Economics; J.D. expected December 2008.