Surrender of Jointly Held Property?

November 15, 2010 | Erin Herbold

 

This case involved the determination of the ownership of property held in joint tenancy after the death of a joint tenant who had created and funded the joint tenancies.  The father died in 2008 survived by three children. His will specified that the three children inherited equal shares of his property.  Before his death, the father attempted to give away property because his children were concerned that funding his long-term health care needs would significantly decrease the inheritance they anticipated.  The children began pressuring their father to make property transfers in 2004.  In an attempt to start accommodating them, the father added one of the sons as a joint owner on two CD’s, and his checking and savings account. The son was not aware of the transfers until the father asked for his signature. Some months later, the father also designated the son as the sole beneficiary of two annuities. The father’s health began to decline and he moved into the son’s home. In 2005, the son became his father’s agent and cashed in the remaining CD’s of which he was joint tenant. He deposited $5000 into the joint checking account and took out two CD’s in his own name for the remainder ($47,000). A year later, the son closed the joint savings account and transferred the balance of $25,000 to his own personal checking account without his siblings’ knowledge. He further sold his father’s residence and placed the funds in his own personal money market account. 

After their father’s death, the two other siblings filed a petition against their brother, alleging that the transfers their father made to the brother were the result of undue influence and should be set aside. At trial, the court concluded that there was no undue influence, but did find that the father only added the son to the accounts for convenience purposes. The court found that the transfers were made with the understanding that the property would be held in a constructive trust to remove the father’s name for the purpose of Medicaid (Title XIX) eligibility. The trial court ordered the brother to surrender the subject property and make a complete accounting of all expenditures made.

The brother appealed and argued that he should have succeeded to the funds as a surviving joint tenant.  The siblings claimed that the court correctly denied the brother ownership in the joint tenancy assets. The Iowa Court of Appeals reviewed Iowa law as it applies to joint tenants. The survivorship interest of a joint tenancy is known as an accretive interest, while the joint tenant’s undivided interest, during the joint tenant’s lifetime, is the proportional interest. A joint tenant is presumed to own an undivided interest in the entire tenancy. However, that presumption is rebuttable. This dispute focused on the father’s intent.  The right to withdraw funds from a joint bank account depends on the agreement or understanding of the parties.  As to the CD’s, the father’s intent was not for the son to inherit the entire account.  The son did not have the authority to cash in the CD’s and deposit them into his own personal accounts. The father had no knowledge of these deposits and the son had no authority, so the joint tenancy was severed prior to the father’s death and the son needed to surrender those funds. The appellate court also concluded that the proceeds of the joint savings account should be accounted for and returned to the estate.

The appellate court disagreed with the trial court with respect to the joint checking account. The father retained ownership and control over these assets for the remainder of his life. The father, by his own admission at the nursing home, intended his son to have this money. All of the evidence showed that the father intended to create a joint checking account with a survivorship interest for the son who took care of him at the end of his life.  In re Estate of Klingaman, No. 0-576/10-0095 (Iowa Ct. App. Oct. 6, 2010).