Undue Influence and Joint Bank Accounts
In my practice, it’s common for me to learn that a decedent held a joint bank account with an adult child or other trusted person in the belief that a joint account would be a convenient way for the fellow account holder to assist in paying bills, depositing checks, and the like. Typically, in an amicable administration, it’s understood that these are “convenience” accounts, and the joint account holder waives off any claim to the account.
It’s not uncommon to find that a decedent divided his or her money into several accounts and made each account joint with a different person. In an amicable administration, this arrangement is viewed as a sort of homespun estate plan, and there is no challenge to the right of each of the surviving account holders to their respective accounts.
Using a joint bank account as a convenience account is unnecessary and inadvisable, and using a joint bank as an on-the-side estate planning tool is a bad idea all the way around, for the reasons described here and otherwise.
The third scenario I encounter involving joint bank accounts is one in which impropriety, typically in the form of undue influence, is suspected. When we discover that, in the months prior to her death, a decedent was brought to her banks by a trusted nephew or a new paramour and that she converted all of her accounts into joint accounts with that person, the inference of impropriety is unavoidable.
It surprises many of my clients to learn that, by statute in New Jersey, money left in a joint bank account “belong[s] to the surviving party or parties as against the estate of the decedent unless there is clear and convincing evidence of a different intention at the time the account is created.” Clear and convincing evidence is a difficult burden to meet if ownership of the account is to be litigated; at this level of analysis, the right of the surviving account holder to the asset seems nearly unassailable.
Under suspect circumstances, however, the right of joint account holder is quite vulnerable if challenged. The first point to recognize is that, in circumstances that give rise to estate litigation on this point, the addition of surviving account holder to the account is almost always a de facto gift. These are not accounts where both owners paid in and both owners used the account to conduct their affairs; these are typically accounts established and funded by the decedent, with the surviving owner later named. The courts are quick to view such transactions for what they are: inter vivos gifts from the decedent to surviving owner.
In the leading New Jersey undue influence case, now more than half a century old, the Supreme Court distinguished between the standard for determining undue influence in the making of a Will as compared to inter vivos gifting. The Court found that “where one is giving away what one can still enjoy, the presumption of undue influence is raised more easily than in cases involving wills.” Subsequent cases have expanded this point, and it is now well-settled how little is required to raise a presumption of undue influence as to inter vivos gifts.
Uniquely, the burden of proof shifts against the surviving account holder if a confidential relationship between the parties can be shown. That is all that is required; if a confidential relationship existed, the surviving account holder must affirmatively that the gift – the making of the joint account – was not the product of deception or undue influence.
What constitutes a “confidential relationship” will require a series all its own, but in short something akin to trust in handling financial or legal affairs will suffice. There is often, in my practice, a power of attorney by the decedent to the surviving holder, and that fact alone establishes a confidential relationship sufficient to transfer the burden of proof.