Joint Accounts, Convenience Accounts and Donative Intent

Many older people add another person (usually a child) as a joint tenant on their bank account.  The question when the older person dies is, did he or she have "donative intent" with respect to the account?  Put another way,...

1. Did the older person intend to make a gift of the account to the other owner upon the older person's death?

OR

2. Was the other owner simply listed as an owner for convenience (maybe it was easier for the other person to write out checks, make deposits, etc.)?

The recent case of In re Estate of Shea (from Illinois' Second District Court of Appeals) includes a lot of nice language talking about how to deal with the above issue.  I've tried to cobble this language into different statements to (hopefully) create an easy 3-step process for addressing the disposition of joint accounts.

Step 1: The Presumption of a Gift (Burden of Proof #1)

As the parties agree, when a sole owner of a bank account adds an apparent joint tenant to the account, the law presumes that the original owner intends a gift.... [T]he relevant presumption is that the joint account agreement alone governs the ownership of a joint account, i.e., speaks the whole truth.

Step 2: Overcoming the Presumption of a Gift - Convenience Accounts

A party challenging the presumption can overcome it only by clear and convincing evidence.... [C]lear and convincing evidence that the joint tenants had any understanding other than that in the joint account agreement can defeat the presumption that the joint account agreement speaks the whole truth.

Illinois authority treats evidence establishing that a joint account was used as a convenience account as overcoming the presumption of a gift....   A convenience account is an account that is nominally a joint account, but is intended to allow the nominal joint tenant to make transactions only as specified by, and on behalf of, the account's creator....  The typical purpose of such an account is to allow the nominal joint tenant to pay the true owner's bills while the true owner is unable to do so.  These cases reasonably assume that a person does not intend to give away the funds in the very account he or she relies on to pay bills.

Step 3: Burden of Proof #2

[O]nce the party challenging the ownership of the bank account has presented sufficient evidence to overcome the presumption of a gift, the presumption vanishes.... However, the burden of proof remains on the party challenging the ownership.... [That is, o]n meeting that first burden, [the challenging party] has the second burden of showing by the preponderance of the evidence that the estate is entitled to the accounts. 

Comments

[Josh Ard]

I checked Michigan's laws on joint accounts a few years back. Amazingly, the presumptions are completely different for bank accounts, credit union accounts, and savings and loans accounts.

[Joel S.]

Good point, Josh -- this stuff can vary completely depending on jurisdiction.