The Problems of Using Joint Accounts with Right of Survivorship in Michigan

There are many tools you can use when planning for your senior years. People who consult with our Michigan estate planning lawyers often choose to utilize multiple documents and tools for asset protection, Medicaid planning, estate planning, and planning for incapacity. However, some ways that a person might choose to transfer assets to an heir may not be a very good option. Joint accounts with right of survivorship can cause more problems than they resolve.

What is a Joint Account with Right of Survivorship?

When you open a bank account, you can add another person to the account as a joint account holder. If the account as a right of survivorship, the funds in the account pass directly to the joint account holder upon your death.  While a joint account may appear to be an efficient and easy way to transfer assets to another person without the asset going through your probate estate, these accounts can raise significant issues upon your death.

There are several attributes of joint accounts that you should discuss with our Michigan estate planning attorney before you determine a joint account with right of survivorship is the best choice in your situation.

  • Two or more individuals may be designated as joint account holders.
  • Unless there is an agreement between the account holders to the contrary, all account holders are considered to have equal ownership of the account assets.
  • Any account holder has the ability and right to withdraw funds from the account.
  • The last surviving owner is vested with sole ownership of the assets within the account unless the other account holder has designated a death beneficiary.
  • Ownership of the assets in the account passes to the last surviving account holder without going through probate.

Why Does Someone Choose a Joint Account?

In some cases, a person may choose a joint account as a simple way to transfer assets upon death to another person. As mentioned above, joint accounts are often considered easy ways to avoid probate.  However, there is another reason that many people choose joint accounts — convenience.

For some individuals, having a joint account is a matter of convenience. In the case of an elderly parent, placing an adult child on the account as a joint account holder can make it easier for the child to pay bills for the parent and manage the parent’s income if necessary. Should the parent become incapacitated or ill, the adult child can continue to pay bills and expenses without the necessity of being appointed as conservator or guardian.

However, a matter of convenience can turn into a huge problem if siblings allege the account should be divided equally upon the parent’s death. A challenge of the right of survivorship can create hard feelings and divide a family.

Who Wins When a Joint Account is Challenged?

Michigan Compiled Laws §487.703 provides guidance about how disputes are settled regarding joint accounts with right of survivorship. The law states that it is presumed the surviving account holder owns the account in the absence of undue influence or fraud. In other words, the account holder intended for the joint holder to receive the funds when he or she added the person to the account. However, this presumption can be challenged.

If you challenge the presumption of a joint account with right of survivorship, you must provide clear and convincing evidence that the account was created for convenience and the original account holder did not intend for the funds to be transferred to the joint holder upon his or her death. Unfortunately, the case law regarding this matter can be confusing.

In 2013, the Michigan Court of Appeals rendered a decision in the case of Paul v. Paul in which the court denied a sibling’s challenge to his brother receiving all of their mother’s money in the joint account upon her death. In this case, the brother’s wife worked for the bank and assisted the mother in transferring the funds to a joint account with her husband. The Court did not find any evidence that the mother had not intended for her son to receive all the funds in the account, even though the son’s wife had assisted in setting up the account.

Then in 2014, the Court ruled in favor of siblings who challenged a joint account. In Harris v. Schmidlin, a couple had added one of their children to their bank account in 1992. When the husband passed away, the mother did not remove the child from the account. Three years later, the mother passed away, and the daughter received all funds in the account. Her two siblings challenged the right of survivorship claiming that their mother had always told them that everything was to be divided equally between all three children. The Court found the testimony rebutted the presumption and the daughter had to share the money with her two siblings.

Consult a Michigan Estate Planning Attorney

Because the use of joint accounts can be problematic, it is best to consult with an experienced Brighton estate planning attorney to develop a plan that meets your needs but does not create problems for your family. Call The Elder Care Firm of Christopher J. Berry, CELA at 888-390-4360 to schedule a consultation with one of our lawyers.

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