Bank Accounts with Death Beneficiary: For Convenience or to Transfer Ownership on Death?

In Michigan, joint bank accounts with a right of survivorship are presumed by law to transfer ownership of the account upon the death of one of the account holders. However, issues often arise when a child or friend of the decedent claims to own the account — and alleges that it was a gift or inheritance to them. Other family members may claim that the account was set up by the decedent for the convenience of making deposits and paying bills, and should be part of the decedent’s estate.

What is a Joint Account?

In Michigan, a joint account is a financial account, such as a checking account or savings account, that is owned by two or more individuals. It allows all account holders to have equal access to the funds it contains. No authorization is needed by any of the account owners to withdraw or deposit funds into a joint account. Michigan also recognizes the use of statutory joint accounts which are established with a contract signed by both parties, allowing for customization of the terms of the account.

Joint accounts are commonly used as an estate planning vehicle. If a joint account is established with a right of survivorship, the surviving account holders automatically inherit the funds upon the death of another owner. These accounts can bypass the lengthy and costly probate process, allowing the surviving account holders immediate access to the funds.

What Happens to a Joint Bank Account Upon an Account Holder’s Death?

Under Michigan Law MCL 487.703, it is presumed that a joint account with survivorship rights is intended to vest ownership in the surviving joint owner. To overcome this statutory presumption, the challenger, usually another family member, must provide “reasonably clear and persuasive proof” to the court that the account was created by the decedent solely for convenience — and not with the intent to transfer ownership upon death. This is a difficult and expensive process.

To determine whether the account was set up for convenience or meant to transfer ownership, courts will consider evidence such as:

• Testimony from family, friends, or bank employees
• Estate planning documents that may reference the account was set up for convenience, such as a last will and testament
• Statements or behavior of the deceased
• Fiduciary relationships (such as if the joint owner was also a power of attorney or executor)

If the joint owner was acting in a fiduciary capacity or under a power of attorney, the law may presume that there was no intent to gift the account assets to that person. To avoid disputes, the best approach is to document in an estate plan whether the joint account was established for convenience or to transfer ownership upon death.

Should You Use a Joint Account?

There are many pros and cons to using a joint account, each of which should be carefully weighed. While they can offer convenience, allow the account holders to have access to funds for shared expenses, and easily pass the account to the other owners when you pass, it’s important to consider the drawbacks.

Notably, if those who share the account have different spending habits or financial priorities, conflicts can arise over how the funds should be spent. In addition, if one of the account holders owes debts, the creditor may be able to seize the funds to satisfy the debt — regardless of whether the other account holder deposited them. It’s best to discuss the advantages and disadvantages of using a joint account with a knowledgeable attorney who can best advise you.

Contact an Experienced Michigan Trusts and Estates Attorney

If you are considering using joint accounts as part of your estate plan, a skillful attorney can discuss the pros and cons. With office locations in East Lansing, Mt. Pleasant, Grand Rapids, and Detroit, The Gallagher Law Firm offers a wide range of estate planning services to individuals and their families. To learn more about how we can assist you, contact us online, call (517) 853-1515 or email bpg@thegallagherlawfirm.com.