A LESSON IN TRUST…
We often come across cases in which a Will or a Trust leaves assets equally to all of the Decedent’s children. However, at the time of death, most of the Decedent’s assets are held in joint accounts with only one of the children named as a joint owner, thereby entitling only one child to the entire account as the remaining joint owner and avoiding the equal distribution that the parent planned through his or her Will and/or Trust.
Unfortunately, the account title tends to control, despite the understanding that the child receiving the account as the joint owner had been placed on the account for convenience purposes only to help mom or dad pay bills, as needed; not to receive all of the assets upon their death. Parents believe their children would never cut out their siblings but this is sadly not always the case.
In a recent case, a sister, named on all of her father’s accounts as a joint owner with the consent of her father and brothers who expected their sister to share equally with them, decided to keep all of dad’s remaining assets at the time of his death. Sister claimed ownership of all of the accounts because dad allegedly wanted her to have the accounts for the care she provided him during his lifetime. In fact, she had already begun withdrawing large sums of money from the accounts shortly before Dad’s death, knowing her brothers were expected to share equally though Dad’s estate planning documents which again clearly provided each child was to be equal beneficiaries in his Estate. Sister claimed father had gifted these accounts to her during his lifetime as an inter Vivos gift
The required elements needed to prove an inter Vivos gift are the following: (1) the donor must perform some act constituting the actual or symbolic delivery of the subject matter of the gift. (2) the donor must possess the intent to give, and (3) the donee must accept the gift.
The burden of proving an inter vivos gift is on the party who asserts the claim, in this case, the sister. Sister must show by explicit and convincing evidence that the decedent intended to make a present gift and unmistakably intended to relinquish permanently the ownership of the subject gift. Only that understanding and absolute abnegation of power will make the alleged gift enforceable. If the judicial mind is left in doubt or uncertainty as to exactly what the status of the transaction was, the sister must be deemed to have failed in the discharge of her burden and the claim of the gift must be rejected. Courts also impose an additional element upon the donee, namely, that the donee must prove that the donor relinquished “ownership and dominion over the subject matter of the gift.”
Sister and the father enjoyed a relationship in which confidence is naturally inspired or reasonably exists. Sister gained an advantage due to that confidence and has the burden of proving that no undue influence was used to gain that advantage. The purpose of this burden of proof is to afford the decedent protection against his voluntary actions, the import of which he may not have fully understood. In explaining the reason for the presumption of undue influence, the purpose is not so much to afford protection to the donor against the consequences of undue influence exercised over him by his daughter, as it is to afford the decedent protection against the consequences of voluntary action on his part, induced by the existence of the relationship between them, the effect of which upon his own interests the decedent he may have only partially understood or appreciated.
It was argued that the joint accounts were put into joint tenancies with sister solely as a matter of convenience, and not with the intention that they bypass the decedent’s will and pass by way of survivorship to sister only. With respect to the principle of “undue influence,” in recognizing its liberal application in inter vivos transfers, the presumption of undue influence is raised more easily than in cases involving Wills. All that is needed is a confidential relationship.
Even with the joint account registration, the sister must prove the requisite “explicit and convincing evidence” that the decedent “intended to make a present gift and unmistakably intended to relinquish permanently the ownership” of his accounts and as noted above, recognize as an additional element, the relinquishment by the donor “of ownership and dominion over the subject matter of the gift.”
Was such relinquishment rendered impossible by law, since sister, despite being a joint tenant, was not a legal owner of the accounts? The joint accounts were legally owned entirely by the decedent during his lifetime because he contributed all the money deposited into them. A joint account belongs, during the lifetime of all parties, to the parties in proportion to the net contributions by each to the sums on deposit. In the absence of proof of net contributions, the account belongs in equal shares to all parties having a present right of withdrawal.
Here, of course, the sister never made any contributions of her own earned income into any of the decedent’s accounts. At the time sister was made a joint tenant for purposes of convenience, she was not a legal owner of any of the accounts; nor was she a legal owner of these accounts at the time of the decedent’s death, since she had contributed nothing to them of her own money.
Consequently, because the sister could not offer evidence that the decedent unmistakably intended to relinquish permanently the ownership of the accounts, these accounts properly pass through the decedent’s last will and testament, and not by way of inter vivos gifts to sister. This conclusion is supported by the above-expressed principle that, if the judicial mind is left in doubt or uncertainty as to exactly what the status of the transaction was, the sister must be deemed to have failed in the discharge of her burden and the claim of gift should be rejected.