The existence of joint bank or brokerage accounts has become ubiquitous in 21st century America. There are numerous legitimate and logical reasons for the creation of a joint account. However, when an Article 81 Guardianship Proceeding is commenced and the Alleged Incapacitated Person (“AIP”) has accounts jointly owned with another person, it is imperative for the Petitioner to determine the reason the joint account(s) was created, the benefits conferred to each joint owner, if any, and the impact the Guardianship Proceeding may have on the funds. This article will explore the different ways of holding joint assets and explain how to treat and marshal said joint assets for the purposes of a Guardianship Proceeding.
It is particularly common for married couples and seniors to have joint bank or brokerage accounts with their spouse, children, sibling(s) or other third parties. For example, the joint account may have been created because the parties to the joint account contributed the funds or assets comprising the account, or acquired said funds during their marriage. An owner may also decide he or she wants a joint owner to have full and unfettered access to the account during their lifetimes (especially helpful if there is a subsequent disability) or upon the death of the owner, irrespective of whether or not the joint owner made equal contributions to the account.
Joint accounts are also commonly utilized and recognized as an effective wealth transfer vehicle, which permits the transfer of assets from one party to another upon death without necessitating the probate of a Last Will & Testament or the creation of a Trust. Joint accounts as well as what are known as “Totten Trusts” or “Transfer on Death Accounts” for brokerage and security accounts, pass by operation of law to the surviving joint tenant(s) or the designated person. For a Totten Trust or Transfer on Death Account, usually only an original death certificate is required by the bank or financial institution as proof that the surviving joint tenant(s) is authorized to access the funds.
For Convenience Accounts
The right to receive by operation of law the joint account upon the death of a joint tenant does not apply to a joint account that is created and held Afor the convenience@ of the depositor. Accounts Afor the convenience@ are regulated by Section 678 of the New York Banking Law. Section 678 provides that “when a deposit of cash, securities or other property has been made, or shares shall be issued in or with any banking organization or foreign banking corporation transacting business in this state, in an account in the name of the depositor and another person, and in the form to be paid or delivered to either Afor the convenience@ of the depositor, the making of such deposit or issuance of shares shall not affect the title to such deposit or shares and the depositor is not considered to have made a gift of one-half the deposit or of any additions or accruals thereon to the other person, and, on the death of the depositor, the other person shall have no right of survivorship in the account. Section 678 of the NY Banking Law.
678 of the Banking Law specifically gives the depositor the ability to have two signatories on an account who can withdraw funds from the account, but where the “convenience” signatory is not permitted to make a gift of more than half of the funds in the account, and his/her access does not bestow any survivorship benefits upon the joint account title holder. In order for the provision of 678 of the Banking Law to apply, the words Afor the convenience@ or similarly Afor convenience only@ must appear on the title of the account. If the aforesaid words do not appear, the presumptions created by 675 of the Banking Law will be applied.
675 provides that the making of a deposit in the name of the depositor and another to be paid to either the depositor or to the survivor is prima facie evidence that the depositor intended to create a joint tenancy, and that where such a deposit is made, the burden of proof is on the one challenging the presumption of joint tenancy. Under 675, three (3) rebuttable presumptions are created: (i) as long as both joint tenants are living, each has a present unconditional property interest in an undivided one-half of the money deposited; (ii) that there has been an irrevocable gift of one-half of the funds in the account by the depositor to the other joint tenant; and (iii) that the joint tenant has a right of survivorship in said entire joint account upon the death of the other joint tenant.
675(b) of the Banking Law provides that the burden of proof is upon the one challenging the presumption of joint tenancy. In Matter of Camarda 63 A.D. 2d 837 and Matter of Coddington 56 A.D. 2d 697, the Court held that the presumption of joint tenancy created by 675 may only be refuted by Adirect proof or substantial circumstantial proof, clear and convincing and sufficient to support an inference that the joint account had been opened as a matter of convenience or by proving undue influence, fraud or lack of capacity.@ See Matter of Kleinberg v. Heller 38 N.Y. 2d 836,841.
With respect to securities accounts or brokerage accounts in joint names, the Transfer on Death Security Registration Act and EPTL 13-4.1 through 13-4.12 permits joint securities and brokerage account holders to have the same rights and choices that joint bank account holders have. The Transfer-on-Death Security Registration Act was enacted on July 26, 2005 and it amended EPTL by enacting a new part four (4) to Article 13. It is essentially codified in EPTL 13-4.1 through 13-4.12. Under EPTL 13-4.2 a Atransfer on death@ or Apayable on death@ securities or brokerage account can only be established by sole owners or multiple owners having a right of survivorship in the account. The owners of a securities or brokerage account held as tenants-in-common are expressly prohibited from creating a Atransfer on death@ account. Although the creation of a Atransfer on death@ or Apayable on death@ securities or brokerage account does not require that any specific language be utilized to create the account, the usage of the phrases “transfer on death” and “payable on death” or their abbreviations “TOD” or “POD” should be used to evidence the creation of the future interest. (EPTL 13-4.5). However, under EPTL 13-4.4, evidence of the establishment of the account is the opening documentation that indicates that the beneficiary is to take ownership upon the death of the other owner(s).
The Potential Problems Caused
by Joint Accounts In A Guardianship
In the past, some Courts in New York, when dealing with the existence of joint accounts in a Guardianship proceeding under Article 81 of the Mental Hygiene Law (AMHL@), did not fully analyze the ramifications of the use of a joint account(s) by the incapacitated person. For example, in the past, some Courts have in their proposed form for the Findings of Fact, Conclusions of Law and Judgement included an outright prohibition against the Guardian maintaining any joint accounts as part of the Guardianship estate. The taking of such a position by the Court requires the Attorney for the Petitioner to be cognizant of such a position, so that he or she may be able to take the appropriate measures, and seek the appropriate and necessary relief as to the joint account(s) in the Petition. If the Court maintains a policy that joint accounts cannot be maintained by the Guardian, it will be necessary for the Petitioner to assess how the joint tenant(s) one-half interest and rights of survivorship in said joint account(s) will be impacted by the appointment of a Guardian of the property, and whether or not the joint tenant will lose his or her rights to access the funds in the joint account, as well as his or her survivorship interest. In many instances where the Guardianship proceeding is being initiated by the spouse of the alleged incapacitated person and the spouse is requesting a transfer of all joint accounts and assets to himself or herself (Medicaid planning/estate planning purposes) then the issue of how to title the account in the Guardianship is often moot.
Additionally, it requires an assessment and review of how and why the joint account(s) was created, who is entitled to notice of the relief being sought and what is his or her right to be heard. Irrespective of what the Court’s proposed form Judgment states, the survivorship rights of a joint tenants(s) cannot and should not be terminated or modified without the joint tenant being given notice of the proposed change and an opportunity to be heard. To accomplish this, it is necessary that the Petitioner undertake a thorough investigation of the account(s) in issue and specifically delineate in the Guardianship Petition what is being proposed with respect to the joint account(s).
Identifying the Joint Accounts In The Petition
81.08 of the MHL specifically provides for the disclosure of the approximate value of any property or assets held by the alleged incapacitated person in the Petition for the appointment of a Guardian. It is incumbent upon the Petitioner to undertake the necessary investigation to determine which bank or brokerage accounts the AIP has in his name alone or holds jointly with others or is the beneficiary of, and to disclose same in the Guardianship Petition.
In doing so with respect to any bank or brokerage accounts, the Petitioner should specifically identify any jointly held bank or brokerage account(s), and whether or not said joint account(s) are joint accounts entitled to the presumptions of 675 of the Banking Law, or are Afor the convenience@ accounts under 678 or Atransfer on death@ accounts with respect to any brokerage account pursuant to the Transfer on Death Security Registration Act and EPTL 13-4.1 through 13-4.12. The Petition should specifically identify any person who has an interest in the account, the extent of his or her interest and whether or not he or she has a right of survivorship in the account.
In most cases this should not be problematic if the joint account holder is the spouse of the alleged incapacitated person (AAIP@), and he or she has a joint account with the AIP. However, if the joint account holder is a child of the AIP or a third party, the Petitioner should obtain copies of the account signature cards and any other bank or financial institution record which may describe whether or not the account is a joint account with rights of survivorship that is entitled to the presumptions of 675 or is a Atransfer on death@ account under EPTL 13-4.1 through 13-4.12 or merely a Afor the convenience@ account under 678.
Specifically Delineate Your Proposal As To
Any Joint Account(s) In the Guardianship Petition
The Guardianship Petition should contain a clear and concise description of the relief sought by the Petitioner with respect to any joint bank or brokerage account(s). If a transfer of the title of the joint account from the AIP to the other named joint account holder is being sought, it is necessary that same be specifically delineated in the Petition. The Petition should also specifically identify the account by its account number, name of Bank or brokerage firm as well as the existing title on said account. It should also specify the title of the account to be created once the account or any part thereof has been marshaled by the Guardian, or whether an apportionment of the account or outright transfer to the other named account holder is being sought. Additionally, it is critical to address the survivorship interest of each joint tenant in the Petition, and your proposal with respect thereto.
As briefly stated above, if the potential exists that the AIP may need Medicaid (either nursing home or home care and/or has estate tax issues) and a transfer of the assets in a joint bank or brokerage account is being sought to the spouse, blind or disabled child (exempt transfer(s) for Medicaid eligibility) it is more likely that the Guardianship Court, will approve a transfer of the AIP=s interest in said account(s) to the other named title holder, without any apportionment to the AIP. This is also true if no objection to the proposed transfer is made by any other interested party to the Guardianship Proceeding; and the AIP=s testamentary scheme as reflected in any Last Will and Testament or Trust is consistent with the proposed transfer.
Obviously, complications could arise when the proposed transfer is to a joint account holder who is not the spouse of the AIP. If for example the joint account holder is a child, family member or friend, there will be issues as to whether or not the child, family member or friend contributed any of the funds in the joint account(s), and whether or not the proposed transfer will create the five (5) year look back period and a period of ineligibility for nursing home Medicaid purposes (unless it qualifies as an exempt transfer to a spouse, blind or disabled child). There will also be the issue of whether or not the other interested parties to the Guardianship will consent to the transfer, and if the proceeds of the account are to be apportioned by and between the account holders, how will title to each apportioned account be held, and what impact will the apportionment have on the survivorship interest of each joint tenant. Whether it be in the new Guardianship account created or the other account, the protection of the survivorship interest of each joint account holder must be addressed.
For example, if apportionment is not sought and a complete transfer is made to the non-incapacitated account holder, will it be necessary that said account be titled Ain trust for@ the incapacitated person. This could be problematic if the incapacitated person is a potential candidate for Medicaid, and the prior death of the non-incapacitated person would result in the passage of the funds by operation of law in the account to the incapacitated person. This problem may be obviated if the incapacitated party can be the beneficiary of a Supplemental or Special Needs Trust (ASNT@). In that event it would be appropriate to title the account of the non-incapacitated party Ain trust for@ the SNT of the incapacitated party.
Additionally, in order to protect the non-incapacitated account holder, it may be necessary to seek that the account marshaled by the Guardianship be titled AX, as Guardian of his or her property of Y, in trust for Z” so as to protect his or her survivorship interest.
There are a multitude of differing and complex scenarios that could arise then dealing with joint accounts within the context of a Guardianship proceeding. However, irrespective of the scenario it is necessary that the Petition address the issue of the joint account(s) head on and clearly articulate the relief sought and the basis for the position being taken.
Additionally, in an age where the cost of long term care is a significant issue for most seniors, it is imperative that all Medicaid eligibility issues be also properly addressed within the context of the Guardianship proceeding.
 Section 678 of the NY Banking Law.
 Matter of Camarda 63 A.D. 2d 837
 Matter of Coddington 56 A.D. 2d 697
 Matter of Kleinberg v. Heller 38 N.Y. 2d 836,841