Who Inherits Your Bank Accounts?
When you open a checking or saving account at your local bank, you are required to fill out many forms. Many people probably don’t understand all the terms and probably do not read all the documents. More importantly, people don’t understand that the way you set up your account can have a big impact on what happens to the money in your account upon your death. Don't assume that the person you add to your account will receive the money when you pass away.
No Survivorship Clause
If you have another person listed on your bank account, you should know whether it has a survivorship clause. Survivorship clauses can be found on the bank’s deposit account form or signature card. It will state that on the death of one party to a joint account, all sums in the account belong to the surviving party on the account. The required language is either there or it isn’t. Texas Estates Codes §113.151 provides that there is no presumption that the survivorship clause is present or that the surviving party owns the funds in the account when the other person dies. Also, no extrinsic evidence can be used to establish a survivorship agreement.
Joint Account is Not Equal Ownership
If there is a joint account without the survivorship clause, then during the life of the account holders each party owns a proportion of the funds equal to their contribution. The surviving account holder will not be the owner of the entire account upon the death of the other account owner. For example, if you purchase a certificate of deposit (CD) and add your child’s name to it as a joint owner, then upon your death your estate, and not the child, will be the owner. See Magee v. Westmoreland, 693 SW2d 612, 616 (Tex App – San Antonio 1985). This is because the child did not contribute money to the account and there wasn’t a survivorship clause for the property to go to the child upon your death.
Convenience Account for Helpers
If an account owner wants to add someone to their account to help them make deposits, withdraws and write checks, then a convenience account may be appropriate. Sometimes, older people may add the name of an adult child to their bank account for this purpose, but they do not intend to transfer ownership of the funds to the adult child upon their death. Under Texas Estates Code §113.004, when the account owner dies, the funds belong to the account holder and not the helper (adult child). To be a convenience account, it should not have a survivorship clause. One advantage a convenience account has over a joint account without a survivorship clause is that the creditors of the convenience signer, e.g. the helper, cannot access the account.
Payable on Death
If you want another person to receive the funds in your account upon your death, but you do not want to give them access to the funds during your life, then you may want to consider creating a “payable on death” account, officially called a P.O.D. account in Texas Estates Code §113.001(5). The P.O.D. account allows you to transfer the funds in the account to a person you named without using a will.
As part of your estate planning, be sure to review your bank account documents to understand your current situation. At the Law Office of Hugh Spires, Jr. we can help you determine which type of account meets your needs. Reach us by calling 210-874-5700 or through our contact form on www.TexasWillsLawyer.com.