One of the many ways some people try to avoid a probate administration of their estate after they pass away, as well as try to avoid the need for a Power of Attorney in Ohio, is setting up a joint bank account because they have a survivorship feature even if the account is not designated as an account with survivorship. 

This means that the surviving owner(s) of a joint account take(s) ownership of the joint account automatically by operation of statute following the death of one of the owners of a joint account. In addition to avoiding a probate administration of their estate and an easy method of estate planning, it can also be used to avoid creditors of the deceased from attaching the account for the creditor’s benefit. Both of these reasons account for the popularity of joint bank accounts. 

For example, a parent can open a joint account at their bank with a child as the joint owner and know the child will become the owner of the account immediately at the parent’s death without any action other than presenting their parent’s death certificate to the bank.

However, there are several aspects of a joint account that need to be taken into consideration when someone opens a joint account. For example, who owns a joint account before the death of an owner? Under Ohio law, it is presumed that, during the lifetime of the owners of a joint account, the account belongs to all of them according to the contributions of each, unless there is clear and convincing evidence of a different intent. However, the ability to establish the contributions of each over the life of the joint account is problematic without keeping a detailed accounting of the contributions as well as the withdrawals from the joint account during the lifetime of the owners.

As a result of the Ohio Supreme Court’s 1994 decision, there is another aspect to consider – who owns the account after the death of an owner? Under Ohio law, there is a presumption that the assets in a joint account are owned by the surviving owners of the account. Indeed, when the Supreme Court of Ohio considered whether the presumption was a rebuttable or a conclusive presumption in the 1994 case before it, the court ruled that the way a joint bank account is opened is usually a conclusive presumption on the question of ownership after the death of one of the joint owners. 

Therefore, to determine the intention of the deceased owner, the court looked to the legal form of the joint account when it was opened. As a result, ownership of a joint account will usually be automatically transferred to a surviving owner(s). The court ruled that only when there is evidence that the deceased owner did not freely intend to establish the joint account will an Ohio court consider an argument after the death of an owner of a joint account that the money in the account should not be distributed to the remaining owner or owners. 

Examples of such a situation are when there is evidence of fraud, duress, undue influence, or lack of mental capacity on the part of the deceased owner when the account was opened.

While the Ohio Supreme Court’s 1994 rulings makes ownership of these joint accounts more certain and as a result makes it easier for Ohio banks to provide such accounts because the decision reduces the possibility of disputes over account ownership after the death of an owner, it also requires consumers to be knowledgeable about the legal effects of joint accounts.

So, what are the legal pitfalls of joint accounts? One is in a joint account that is set up for convenience of one of the owners. For instance, naming one child as a joint owner so an elderly parent’s bills can more easily be paid by the child. When this occurs, the joint account will be owned by that child alone upon the parent’s death even though the parent intended the account to be distributed equally among all of the parent’s children after the parent’s death. 

Another pitfall to consider is when setting up a joint account with someone who is under the age of 18 or is a spendthrift. In both situations, the joint account may pass to someone who is incapable of handling the funds they will automatically receive from the joint account without any restrictions of any kind upon the death of the other owner. In such cases, the deceased owner may have been better served by setting up other alternatives, such as the creation of a limited or general durable power of attorney or the creation of a revocable trust for the funds.

For those with accounts in states other than Ohio, they should take note that the law on ownership of joint accounts varies from state to state. While the National Conference of Commissioners on Uniform State Laws proposed in 1989 that uniform legislation it drafted called the Multiple-Person Accounts Act should be adopted in all states, many states have regretfully not adopted this proposed legislative action. The reason it is regretful is because provisions of this proposed legislation encourage banks and credit unions to offer pay-on-death accounts and agency accounts as alternatives to joint accounts. This language of the model statute would protect the financial institutions since it would provide the means to pay the funds in the account in accordance with specifically expressed terms of the bank account contract rather than rely on statutes and court rulings.

While this model legislation has not yet been adopted in Ohio, it has been enacted in a few other states – Florida, Alabama, Nebraska, Massachusetts, Montana, Arizona, the District of Columbia and the U.S. Virgin Islands have already enacted the model law. And despite the fact that the model law has not been widely adopted, a number of other states have passed into law similar provisions as part of their probate laws. Therefore, even without the passing of the Multiple-Person Accounts Act, distribution after death in accordance with the actual terms of a joint account in most circumstances is now the law in more than half of the states.

The information contained in this article is intended to provide only general legal information and is not intended to be relied upon for specific legal issues or any particular legal matters. For specific legal issues or any particular legal matters, the reader is advised to consult with and secure the legal advice of an attorney of their choice.

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