Unilateral Withdrawal of Funds in a Joint Bank Account

A married couple, without children, held a large amount of their assets in bank accounts as joint tenants with full rights of survivorship.  Both the husband and wife became seriously ill, with wife subsequently moving into a nursing home.  The husband then decided to take complete control of the couple’s assets by withdrawing the couple’s joint funds, and putting them into his personal account.  The husband then made his account payable on death to the wife’s sister. The couple had previously designated their joint account as payable on death to the wife’s brothers. The husband also changed his will to provide for his wife if he predeceased her, but leaving his property to his wife’s sister if she died first. 

The husband then predeceased his wife, and the wife and her brothers then sued alleging that the husband and the wife’s sister wrongfully converted the wife’s assets.  The trial court determined that the husband’s intent was to continue to provide for his wife in the event of his death.  As such, that prevented the destruction of the couple’s joint tenancy with the right of survivorship bank accounts.  The wife’s sister appealed, arguing that she should have received the couple’s assets as the husband’s payable on death beneficiary. 

On appeal, the court reversed on the basis that the husband “clearly demonstrated his intent that the funds no longer be held in the joint tenancies.” The appellate court then found that under Iowa law, a joint tenant’s right of survivorship is separate from a joint tenant’s right to a proportionate share of the previously joint account.  Iowa does not follow the so-called “New York rule,” and upon termination of a joint tenancy, each joint tenant retains his or her right to a proportionate share of the account (an “intent-based” approach).  In this instance, the husband clearly intended to terminate his wife’s right of survivorship in their joint accounts, by withdrawing all the couple’s funds. However, the wife retained her right to a proportionate share of the funds, which the law presumes to be 50 percent.  Therefore, the court determined that the wife could recover the funds withdrawn by her husband that exceeded his 50 percent share.  Kettler, et al. v. Security National Bank of Sioux City, et al., No. 1-501/10-1803, 2011 Iowa App. LEXIS 923 (Iowa Ct. App. Sept. 21, 2011).