Thursday, May 3, 2012

When Does an Account Have a “Right of Survivorship”?

Texas law has not favored the creation of joint ownership with right of survivorship (“ROS”) for a variety of historical reasons. Executors of a deceased’s estate are often left to wonder – is this joint account non-testamentary (in other words, not an asset of the probate estate subject to the executor’s control) because it meets the requirements for a right of survivorship under Texas law?  Financial institutions can be reluctant to pay on these joint accounts prior to some form of probate, which prevents the co-owner(s) from having access to funds needed to pay their bills.

So much for careful estate planning to minimize probate assets!

Chapter XI of the Texas Probate Code deals with non-testamentary transfers, with particular attention to multi-party accounts and survivorship rights. One of the first things you should try to obtain is a copy of the account agreement. Look to see if it uses language such as “on the death of one party, all sums belong to the surviving party as his or her separate property and estate.”  Tex. Prob. Code § 439. Reliance on the name of the account, alone, is usually insufficient to create survivorship rights.

In addition, you may want to check the account agreement against the proposed “Uniform Single-Party or Multiple-Party Account Form” described in section 439A of the Texas Probate Code. Banks and other financial institutions which utilize this form, or something substantially similar to it, are protected from most claims that could be brought by a deceased’s estate, personal representative, beneficiaries or heirs if they rely on the “survivorship” provisions to pay remaining sums to the joint owner(s).

Article by Cynthia W. Veidt, Attorney