Yvonne was an elderly lady, single with no kids, who had a trust leaving most of her estate to her niece Elizabeth. Yvonne’s trust also left a generous cash gift to her best friend Monica and several smaller gifts to relatives other thanElizabeth.
Over the years, Yvonne and Monica had often helped each other with their finances when times were rough. They owned a rental house together in joint tenancy with the idea that when one of them died, the other would naturally become the sole owner and could pass the whole property on to her own respective choice of beneficiaries.
A few months before Yvonne’s death, when she was ailing and starting to become forgetful, she thought it would be a convenience to have Monica on title on her checking account and large savings account, both of which had been titled in Yvonne’s name as trustee of her trust. Yvonne didn’t think to ask her attorney to simply make sure that Monica was empowered to help Yvonne with these accounts by having Power of Attorney to act in case Yvonne were ever unable to do so. Instead, the two friends went to the bank together and Yvonne filled out a form making Monica a joint tenant on the bank accounts. The bank manager didn’t blink an eye: she had known these two for many years and assumed they knew what they were doing.
Joint tenancy is an improvised form of estate planning. Elders often realize that they need help managing their accounts, and so they add someone else’s name on title to a bank account or even to real estate. What they may not realize is that they are effectively giving away their property while they are still alive. And, by doing so, they may be defeating the terms of their formal estate planning documents. Joint tenancy property will pass to the other joint tenant rather than to beneficiaries named in one’s will or trust.
A few weeks went by and Yvonne died. Monica didn’t wait to learn that Yvonne had left her a sizable cash gift via Yvonne’s trust. Instead, she went to the bank where the joint tenancy accounts were, claimed them for her own, closed the accounts and added the proceeds to her own account.
A few weeks later, niece Elizabeth who was also named as the Successor Trustee of Yvonne’s trust, went to the same bank with the intention of collecting the accounts into a single trust administration account. It wasElizabeth’s job as Successor Trustee to locate all of Yvonne’s assets, pay off any of Yvonne’s outstanding bills, and distribute trust assets to herself, Monica, and others named in Yvonne’s trust.
What a surprise forElizabethwhen the bank manager told her the bank accounts had been closed! She immediately suspected that Monica had taken the money. Elizabethhad never liked Monica. She had not appreciated her aunt Yvonne’s reliance on someone outside the family. Because of her years of distrust,Elizabethdidn’t even bother to ask Monica what had happened. She went straight to an attorney working in the area of elder financial abuse and said she wanted to sue Monica. Because Yvonne was a senior – and even though Monica was, too—a lawsuit against Yvonne would include enhanced claims and penalties for financial abuse of an elder.
Elizabeth slapped Monica with a big, fat lawsuit alleging that she had exerted undue influence in the weeks before Yvonne’s death, that she had taken advantage of Yvonne’s failing memory and physical weakness to take hundreds of thousands of dollars that otherwise would have passed by way of Yvonne’s trust. Monica had to hire her own attorney to fend off these charges.
Elizabeth and Monica eventually settled the lawsuit. Monica had to give back the money she had taken from the joint tenancy accounts, and she had to pay her attorney thousands of dollars, to boot. Elizabethhad to pay her attorney thousands of dollars as well.
Both Yvonne and Monica had made a serious, unintentional mistake, because they had jumped on a deceptively easy way of giving Monica the power to manage Yvonne’s money for her. Yvonne was long gone, and it was the person who had unwittingly agreed to “take care of” Yvonne’s money who ended up paying the price for it. For her part,Elizabethcould have tried negotiating with Monica before hauling off and suing her, thus saving everyone a lot of money and trouble.
Yvonne should have kept those accounts in her trust and made sure that Monica was named as her Agent under a Power of Attorney. Apart from an attorney-drafted Durable Power of Attorney, she also could have filled out a form at the bank, naming Monica her Agent under a Power of Attorney for those specific accounts. In these days of rampant elder financial abuse, many banks prefer a Power of Attorney done on their own forms regarding specific accounts.
Had Yvonne’s intention been to increase the size of her cash gift to Monica, she could have asked her attorney to amend her trust to give Monica more. ThenElizabeth, as Successor Trustee, would have been obliged to carry out the terms of the trust and its amendments, regardless of her animosity toward Monica.
Don’t use joint tenancy as a convenient form of improvised estate planning. Use up-to-date trusts to spell out a distribution plan for your assets after you’ve died. Use trusts and Powers of Attorney to make sure your choice of successor Trustees and Agents are empowered to act for you if you are ever unable to do so for yourself.
