• Who Do You Trust?— New Ruling Highlights the Need for Care in Deciding How to Open Your Joint Bank Account
  • December 29, 2014 | Authors: Karl R. Gruss; Edward Lee Kelly
  • Law Firm: Rogers Towers, P.A. - Jacksonville Office
  • Florida law recognizes, and most banks offer, multiple forms of account designation to meet the desires and needs of individual customers. Keep in mind, however, that the standard demand deposit account agreement (whether checking or savings), is primarily, and understandably, designed to guide and instruct the bank with respect to the payment of checks drawn upon, or withdrawals made from, such accounts. A depository institution does not want to become entangled with issues regarding the ownership of the funds on deposit in accounts designated in the names of multiple parties and to which there may be competing interests. Chapter 655 of the Florida Banking Code includes a number of provisions primarily designed to govern and protect the financial institution in establishing and maintaining checking and savings accounts (including, in most cases, certificates of deposit) in the names of multiple parties, but those same provisions may also have adverse consequences for the uninformed depositor.

    Multiparty Bank Accounts Available in Florida

    Most banks and credit unions offer the following types of multiparty accounts: (i) joint accounts, (ii) convenience accounts and (iii) pay-on-death (“POD”) accounts. Florida common law also recognizes accounts set up under the so-called “Totten Trust” doctrine (accounts designating the account holder as trustee for another designated person, where no express trust exists), although the POD account is intended as a statutory replacement for the Totten Trust. Bank personnel are neither equipped nor required to give advice with respect to the legal differences in these accounts, although the bank may provide explanations in the accompanying account rules, so it is up to the customer to select the appropriate account designation (often presented as a list of options on the signature card agreement).

    Disbursing Contested Funds in a Joint Account vs. a POD Account

    The recent case of Brown v. Brown, decided by the District Court of Appeal for the First District of Florida, demonstrates the consequences of failing to understand the rules governing two of these account types-a joint account and a POD account. A customer established four certificates of deposit and one savings account at several different banks, designating two of the accounts as joint accounts and three as POD accounts. In each case, the customer, mother of six adult children, designated one of her sons (you can see this coming) as the joint tenant on the joint accounts and the sole beneficiary on the POD accounts. The mother died and the son claimed the funds in all of the accounts. The trial court ruled against the son, holding that all of the accounts were property of the estate.

    The trial court relied on Section 655.79 of the Florida Statutes, which creates a presumption that funds on deposit in a joint account vest in the surviving account party upon the death of the other, but further provides that the presumption can be overcome by clear and convincing proof of a contrary intent. In this case, there was clear evidence (even the son named on all of the accounts admitted it) that it was the intent of his mother that the six children should share equally in all of the accounts after her death. The district court affirmed as to the joint accounts. The district court determined, however, that the trial court erred on the POD accounts created under Section 655.82 (approximately 43% of the total of all funds). That section does not create a presumption or have an exception like the one contained in Section 655.79. In the case of the POD accounts, ownership of the balances vested by statute in the beneficiary upon the death of the mother.

    The designation by an elderly person of one child, grandchild, nephew, niece, etc., on a joint account for convenience in assisting such person with financial affairs is not uncommon. It is unfortunate that, if the wrong type of account is used, it may frustrate the intent of such person to share his or her property with other relatives at death, especially if the other account party chooses to ignore such intent.