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Co-Owning Bank Accounts — A Source of Frequent Legal Jeopardy

On Behalf of | May 16, 2019 | Trust Disputes

Buffington Law Firm’s elder law and trust litigation attorneys have frequently dealt with situations where two persons (not spouses) are co-owners of bank accounts.  This often occurs, for example, when a relative is placed on an elderly person’s bank account as co-owner so that such person can help pay bills and so forth.  In many situations the person who contributes most or all of the funds to the bank account does not intend to make a gift to the new account “co-owner.”  Many people do not read the forms that they sign when they place another person on the account and banks are notoriously poor at explaining the legal ramifications of the forms that they give the people to sign.

The misconception often gets even worse.  The new “co-owner” of the bank account not infrequently believes that he or she has equal right to the money in the account, even where the other owner contributed all or nearly all of the funds.  Such persons often start dipping into the account for their own personal expenses far in excess to what they put into the account.

Under California law, this is improper and creates legal liability absent clear and convincing evidence that the other co-owner of the account intended to make a gift. [See generally Probate Code Sections 5301(a), 5134, 5150]. Put simply, any taking by a person on the account in excess of what he or she contributes is a taking from the other account holder(s).  This can implicate legal liability.  If the other account holder is an elder, this can and frequently does give rise to a Financial Elder Abuse claim.  This can constitute serious legal jeopardy.

Often when someone is a “pay on death” beneficiary of an account that they co-own, they think that all the money is available to them before the other person’s death.  This too is not so.  A “pay-on-death” beneficiary has no rights to the sums in the account during the lifetime of any other owner of the account unless there is clear and convincing evidence of a different intent, e.g. an intent to make a gift.  [Probate Code Section 5301(d)].

Needless to say, confusion that people have over their rights when they “co-own” an account often leads them to serious legal peril.  We have been struck by how often this point is misunderstood by bank account co-owners and how often they believe that they have an unlimited right to use the funds in the account.

If you are involved in a controversy involving Financial Elder Abuse, dispute over bank funds, trust litigation, or any of our practice areas, we invite you to contact us for a free legal consultation.  All discussions are completely confidential and all discussions are with experienced litigation attorneys.  There is never any cost or obligation.  Call us today!