Wills and Estates – What happens to Joint Bank Account when one of the Account Holders Dies?
WILLS & ESTATES - WHAT HAPPENS TO JOINT BANK ACCOUNTS
WHEN ONE OF THE ACCOUNT HOLDERS DIES?
Joint bank accounts are a useful way in which partners and married couples can manage their finances. Joint accounts allow for bills and other household expenses to be paid more easily. When parents become much older and rely upon adult children to pay bills on their behalf, joint bank accounts between parents and children allow the children to assist with the affairs of their parents as they grow old and infirm.
What happens, however, upon the death of one of the account holders? It can often be difficult for the legal personal representative of the deceased accountholder to know the extent of the deceased’s interest in a joint bank account after their death. Difficult questions may arise over what proportion of the account balance should form part of the deceased’s estate and what proportion should go to the surviving joint account holder.
The general starting point in cases of jointly held bank accounts is that on the death of one of the account holders, the “principle of survivorship” applies so that the account balance passes in its entirety to the surviving joint account holder. This principle of survivorship is entrenched in Australian common law. It will override any terms that may be to the contrary in the deceased’s will. This means that the surviving account holder can present the deceased’s death certificate to their bank and the bank will probably transfer the account balance into the survivor’s sole name or will allow the surviving account holder to continue to operate the joint bank account even before probate has been granted and whether or not the surviving account holder is the deceased’s executor or even legal personal representative.
In the case of most couples, this is usually what the deceased would have intended anyway and the issue does not arise. Difficulties will occur, however, where a young child (perhaps even an infant) has been added to the joint account upon the basis that the child would only receive the account balance when he or she turned 21, 30, 35, etc. Upon the death of the parent account holder, the funds in that account may pass to the surviving child irrespective of the terms of the deceased’s will even if the child was the subject of a testamentary trust to provide for the child’s advancement and future education and welfare needs. Another problem is what would happen if there were other children in the family or, perhaps, if another child had been added to the account after a will had been made?
What is the situation where the contributions made to the account were unequal, with the deceased providing the majority of the funds? A dispute may arise as to who should receive the account proceeds.
In all of these situations, Australian courts can look at the intentions of the parties when the account was created and at their subsequent behaviour. Clear evidence may well nullify the survivorship principle.
When deciding disputes over the respective interests of holders of joint bank accounts, the court will start with the presumption that funds contributed by the deceased account holder will form part of his or her estate to be disposed of by their will. The court reaches this starting point by presuming what is known as a resulting trust over the funds in favour of the person who provided the account monies. This is only a rebuttable presumption. It will prevail, however, over the bank’s terms and conditions in relation to the account otherwise giving the account to the surviving account holder. The resulting trust presumption will only be rebutted with direct evidence of the deceased’s intention to gift the money to the surviving account holder. If this occurs, then the survivorship principle would take effect.
The situation is different when accounts are held between married spouses or between civil partners, or between parents and children. In all three cases, rather than presume that the funds revert back to the estate of the deceased holder, the court will presume the opposite – that the deceased’s intention was for the account balance to pass in its entirety to the surviving spouse, civil partner or child. This is a legal principle known as the presumption of advancement. This presumption can again be rebutted by direct evidence of intention to the contrary.
How will courts find evidence of the intention of a deceased?
Usually, there is no written evidence of the deceased’s intention. Parties are likely to have to rely on informal understandings or oral agreements. Courts will sift through the evidence and find the intention of the deceased. This can often be an expensive process where there is no clear written evidence which documents the deceased’s intention. Joint bank accounts are often opened by parents and with named children. Initially, there will often be no intention on the part of the parent to gift the account proceeds to the child. The presumption at that time would have been that the funds would fall back into the deceased parent’s estate on a resulting trust basis. Courts will thoroughly examine all the surrounding evidence. There may be evidence that the deceased parent had always decided to give the money in the joint account to the named child. Alternatively, there may be evidence that the parent had decided that this particular child should receive no inheritance, possibly due to a marriage to a wealthy husband. Other useful evidence might be a will which disinherits the named child or which, alternatively, indicates that the bank account was in fact to be paid to her. In the latter case, the court would probably order the balance of the joint account to pass to the named child on the principle of survivorship even though the deceased might have provided all of the account monies.
The moral to this article is that it is prudent for parents to keep a written record of their intentions in relation to how they wish for the monies in any accounts of which they are joint holders to pass after their death. Courts may eventually find evidence of intention from the surrounding circumstances but this will only be after expensive court litigation. If necessary, document your intention in a “letter of wishes” to be stored with your will.
You should also ensure that your will reflects your intentions in relation to any joint accounts especially if you want your share of jointly held monies to be paid from the residue of your estate.
This article is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to render legal advice. No reader should act on the basis of any matter contained in this article without first obtaining specific professional advice.
For any further information concerning this article or requiring to make a will, please contact Michael Pickering, Principal, Judicate Lawyers – Barristers and Solicitors of Unit 11 / 233 Cardigan Street, Carlton, Victoria, 3053. His contact details are as follows: