Often an aging parent will add an adult child to the parent’s account as a joint holder to assist with asset management or bill payment. However, this may lead to an unintended result in California when the parent dies. The child, as surviving account holder, may get all of the account proceeds even if the parent wanted them shared among a group of beneficiaries.
Provisions of the California Probate Code set ground rules for the treatment of joint accounts, but the statutory language is not crystal clear. In Placencia v. Strazicich (2019) ____ Cal.App.5th ____, the Court of Appeal clarified that the intent of the person who established the account is paramount such that the surviving account holder’s presumed right of survivorship can be overcome by just about any sort of admissible evidence, as long as it is clear and convincing. The survivor just may have to share the piggy bank.
Ralph Sets Up A Joint Account But Later Executes A Will Negating Right of Survivorship
Ralph Placencia opened a joint Franklin Fund account in 1985 with one of his three daughters, Lisa Strazicich, as a joint tenant with right of survivorship. He contributed all the funds in the account and controlled it entirely.
Shortly before his death in 2009, Ralph (with help from his brother in law) executed a will in which he expressed a specific direction to “remove Lisa … as sole beneficiary of my Franklin Fund. I want the beneficiaries to be … my three daughters.”
After Ralph passed away, Lisa transferred all assets in the joint account (apparently valued in excess of $200,000) to her own account. Litigation ensued.
Key Probate Code Provisions
Probate Code section 5302(a) provides that when one holder of a joint bank account passes away, the account becomes the property of the other “unless there is clear and convincing evidence of a different intent.” This is typically referred to as a right of survivorship. While not stated explicitly, this section suggests that a wide range of evidence can be used to show an account holder did not intend for the account to transfer to the survivor.
However, Probate Code section 5303 states that “rights of survivorship are determined by the form of the account at the death of the party” and provides a short list of exclusive methods through which a joint account holder can change the terms of the account. These methods include closing and reopening the account with different terms or presenting a modification agreement to the bank, but do not include writing into a will that an account should not pass to the surviving account holder. In fact, section 5302(e) explicitly states that a right of survivorship “cannot be changed by will.”
Sections 5302 and 5303 therefore appear to be in tension. Section 5303 could be read to state that unless a few specific actions are taken, the form of the account will determine whether it passes to the survivor, while section 5302 suggests that even if the section 5303 methods are not followed the account will not transfer to the survivor if there is clear and convincing evidence that the deceased account holder intended otherwise.
So what happens when a joint account is not altered by any of the methods listed in section 5303, but the decedent does express an intent to negate the right of survivorship before passing? And what if the intent is expressed through a will?
Probate Code Sections 5302 and 5303 Cover Different Issues
The Placencia court grappled with these issues and determined that section 5302 directs a judge to honor the clear intent of the person who established the account even if the procedures outlined in section 5303 are not followed, and even if the intent is expressed through a will.
In holding that the methods listed in 5303 do not need to be followed to negate the right of survivorship, the court explained that sections 5302 and 5303 each have their own unique purpose. Section 5303 provides methods for changing the “terms of a multi-party account,” which determines whether a bank is liable for allowing someone to take money out of a joint account. Section 5302, on the other hand, is concerned with deciding who actually owns the joint account.
Probate Code sections 5401-5407 describe when a financial institution is liable for conduct relating to a joint account. Notably, section 5405(a) states that institutions cannot be held liable for paying funds to an account holder if they follow the terms of the account, regardless of whether that “payment is consistent with the beneficial ownership of the account as between parties.” In other words, even if one joint account holder takes money out of the account when they were not supposed to (because they were not the true owner of the account), the bank is not liable as long as it followed the terms of the account.
Section 5303 thus ensures that “the financial institution has an ascertainable, objective basis upon which to pay out the funds in a manner that does not subject it to liability.”
Section 5302, by contrast, states that “sums remaining on deposit at the death of a party to a joint account belong to the surviving party or parties as against the estate of the decedent unless there is clear and convincing evidence of a different intent.” Thus, section 5302 is concerned with who really owns the account, not with whether the bank has followed the account terms.
The court synthesized these sections of the Probate Code by explaining that while section 5303 permits a financial institution to give account funds to a surviving account holder in accord with the terms of the account without risk of liability, section 5302 permits the decedent’s estate to bring a claim against the surviving account holder to the extent there is clear and convincing evidence showing the decedent did not intend for the account to go to the survivor, regardless of whether the specific methods for altering the terms of the account laid out in section 5303 were followed.
Hence, it was appropriate for the bank to permit Lisa to withdraw the money from the joint account because the methods for changing the terms of the account had not been followed, but Lisa’s sisters could still bring a claim against her to recover the funds under section 5302 on the ground that Ralph had expressed an intent to negate the right of survivorship.
Effect of Probate Code Section 5302(e) Is Limited
Having decided that the section 5303 procedures do not need to be followed for an account holder to negate the right of survivorship, the court then turned to the question of whether a will can provide evidence of intent to negate the right of survivorship in light of section 5302(e), which states that a right of survivorship “cannot be changed by will.”
While on its face this language suggests that a will cannot change the right of survivorship inherent to a joint account, the court found that this section was only designed to reinforce the rule laid out in section 5304 that when a joint account passes via right of survivorship it does not need to go through the probate process because survivorship rights are contractual, not testamentary (i.e., not established through a will).
The court explained that while the will by itself may not have altered the right of survivorship, section 5302(e) does not preclude the will from serving as evidence of the decedent’s intent. In this subtle regard, it is the settlor’s intent as shown by the will that alters the right of survivorship, not the will itself.
The court therefore found no reason to disregard the will as evidence of Ralph’s intent and upheld the Orange County Superior Court’s ruling that Ralph did not intend for the joint account to pass solely to Lisa.
A right of survivorship in a joint account is not absolute. Whether a joint account has a right of survivorship will turn on evidence of the decedent’s intent, which can include statements made in a will.
The standard is still high, in that clear and convincing evidence must be shown, but Placencia confirms that the path to successfully negating the right of survivorship is wider than the Probate Code may have suggested.