If a person realizes that they need help managing their finances, whether due to advancing age, disability, or a combination of these factors, the person may decide to add another person on one or more of their bank accounts. Usually that person is a family member, but if family does not live nearby, the person could be a friend or possibly even a caregiver. The idea is straightforward: to allow the joint account holder access to funds so that person can assist the primary account holder in managing their money and paying bills. These arrangements are commonly referred to as “convenience accounts.” At first glance, the arrangement makes sense. It is easy to set up, costs nothing, and no one asks to see a copy of a power of attorney. However, there is one potential problem, proving a convenience account after death can be difficult, time consuming and expensive. Under the law, when one joint account holder dies, the survivor automatically becomes the owner of the account. If the account truly was for convenience only, the primary account holder may have never intended for all the funds to be left to the account holder who was simply there to help.
Fortunately, the law recognizes convenience accounts, but proving that an account was for convenience only is tough. Rarely, is there documentation clearly identifying the account as convenience only and the person wishing to challenge the joint account must prove that it was in fact meant for convenience. This is a fact-intensive inquiry based on many factors. The fact that the primary account holder had health issues is clearly important as this shows the reason for needing a convenience account in the first place. Obtaining the primary account holder’s medical records will be required and that usually means that a probate process must be started for the deceased person. If the primary account holder had a last will, that is important because it shows how the person would have wanted his or her estate distributed. If the “helper” on the account is not even mentioned in the last will, this can be a sign that the primary account holder did not intend for the “helper” to receive all the funds on death. However, this is not conclusive as anyone is free to change their estate plan.
From there, the process will involve interviews with family members, attorneys, accountants and friends to see if the primary account holder ever told anyone about his or her true intentions. Other advisors, such as a financial advisor or tax preparer, may have information about the true purpose of the account. In some cases, the “helper” on the account may have been told that he or she was placed on the account for convenience only.
When investigating the facts, the possibility that the primary account holder lacked mental capacity or was unduly influenced in placing the “helper” on the account should always be on the back of your mind. Lack of mental capacity and undue influence are not just limited to invalidating wills but can also be used to invalidate a joint account.Whether a joint account was established for convenience is a very fact-intensive inquiry. If you believe that a joint account was set up only for convenience and not so the joint account holder would receive all the funds on the other account holder’s death, our attorneys can sit down with you and evaluate your case.