For farm and business families with large revolving accounts, the estate could be losing out on a significant portion of the decedent’s total assets by creating a joint account with right of survivorship.
Joint accounts are a common tool used by older people to help them manage their finances. Typically, they add a child to the account to pay bills if they are unable to do so. However, these convenience accounts carry a certain risk if they are not carefully set up. If the account is set up as a joint account with right of survivorship rather than adding the second person as a signatory only, the second person gets the balance of the account upon the death of the older person. By Minnesota law, multi-party accounts are distributed per the terms of the account. When one owner dies, the account is automatically owned by the survivor. For farm and business families with large revolving accounts, the estate could be losing out on a significant portion of the decedent’s total assets by creating a joint account with right of survivorship. This could result in a contested probate if it is not what the other heirs to the estate were expecting.
In 2011, the Minnesota Supreme Court established a bright-line rule for these types of accounts in the case In re Estate of Butler. The Court made clear that only evidence “specifically referring to such account” in regard to intention and disposition by will should be considered. In the Butler case, Patrick Butler was survived by three children and four stepchildren. The accounts in issue in the case were CD accounts that Mr. Butler had set up with his daughter Maureen. Even though Mr. Butler’s will divided his estate in equal shares between his children, the entire balance of the CD accounts went to Maureen. The other children did not think Mr. Butler intended for the accounts to pass directly and solely to Maureen, so they challenged it. However, the Court did not find that the evidence offered satisfied the standard.
Pertinently, the Court held that decedent’s will dividing his estate in equal shares was irrelevant for determining intent and disposition by will since it did not specifically refer to the joint accounts. The Court held that evidence that the survivor was not decedent’s favorite child and would not want to favor her over the other children was irrelevant since it did not specifically refer to the joint accounts. The Court held that evidence that the survivor referred to the joint accounts as “Dad’s” was irrelevant since it was a statement by the survivor and not decedent’s statement of intent. The Court found unpersuasive evidence that the decedent had funded the joint account with fire insurance proceeds from a cabin decedent’s wife owned as it provided little guidance in determining decedent’s intent. The Court declined to determine whether the form designating the joint accounts with right of survivorship provided “conclusive evidence” of the decedent’s intention to create a survivorship account under M.S. 524.6-213. The Court concluded that the respondents failed to produce sufficient evidence from which a reasonable jury could have concluded by clear and convincing evidence that decedent had a “different intention” than to have the surviving joint owner receive the proceeds of the joint account upon decedent’s death. Evidence offered must specifically refer to the joint accounts.
The Court relied almost exclusively on statutory interpretation for its decision. Previous caselaw has held that the presumption by surviving parties to a joint account does not arise if the account was created through a violation of fiduciary duty and that the joint account must be validly created by full disclosure from the principal to the fiduciary. See In re Estate of Nordorf and Carlson v. Carlson. Typically, this applied where the person creating the joint account did not understand the effect of transferring funds into joint tenancy. It seems with this stricter standard those with joint accounts should be very explicit in how their assets are to be divided. As the Court showed in the Butler case, only evidence that specifically relates or refers to the account will be considered. For farm and business owners, it is especially important to make sure large accounts are being transferred the way they are intended.