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Bank Accounts: ownership intent trumps legal form of ownership

Written by on Sep 4, 2018| Posted in: Probate Litigation

Lorraine Kowalski and her husband, Leon, were legally married but separated for approximately sixteen years when Leon died in 2015.  At the time of his death, Leon was living with his long-time, live-in girlfriend, to whom he devised the majority of his estate in a Last Will and Testament.  Lorraine sought an elective share of the estate.  During the probate proceedings, a special master was appointed to determine certain issues, among them Leon’s interest in a bank account in Lorraine’s sole name.  The special master found that Leon owned 50% of the account and that Leon’s share should be distributed to Leon’s estate.  The trial court confirmed the special master’s report and Lorraine appealed.  The appellate court affirmed.

In 2006, Lorraine and Leon sold their business and received $3,445,066 which Lorraine held in an account in her sole name.  Over the years, Leon would ask Lorraine for money when he needed it and at the time he died had asked Lorraine for and had received in excess of $1,000,000 from the account.  The estate sought to recover the balance of Leon’s 50% from Lorraine’s sole-named account and, for reasons the appellate opinion does not make clear, Lorraine took the position that the account was intended to be a tenancy by the entireties and therefore passed to her by operation of law upon Leon’s death and was not part of the probate estate.

The Second District provided an excellent summary of tenancy by the entirety:

A unique aspect of a tenancy by the entirety is that each spouse is “seized of the whole or the entirety, and not a share, moiety, or divisible part.” Sitomer v. Orland, 660 So.2d 1111, 1113 (Fla. 4th DCA 1995) (quoting Bailey v. Smith, 103 So. 833, 834 (Fla. 1925), receded from on other grounds by Beal Bank, SSB v. Almand & Associates, 780 So.2d 45, 49 (Fla. 2001).  In other words, “property held by husband and wife as tenants by the entireties belongs to neither spouse individually, but each spouse is seized of the whole.” Beal Bank, SSB, 780 So.2d at 53.  “The important attribute separating a joint tenancy from a tenancy by the entirety is that in a tenancy by the entirety neither spouse may ever sever or forfeit any part of the estate without the asset of the other, so as to defeat the right of the survivor.”  Sitomer, 660 So.2d at 1113 (citing case).

The Second District further observed that “[w]hen a married couple holds money in a jointly-titled bank account, a rebuttable presumption arises in favor of a tenancy by the entireties, unless the terms of the account expressly disclaim the tenancy by the entireties form of ownership.”  Kowalski v. Rosenbaum, 43 Fla.L.Weekly D1703a (citing Beal Bank SSB v. Almand & Associates, 780 So.2d 45 at 57 (Fla. 2001).

The court found there was no dispute that the business property that was sold constituted Lorraine and Leon’s marital property and noted that “[g]enerally, ‘[t]he proceeds from the sale…of tenancy by the entireties property are also held as a tenancy by the entireties and are owned in total by both the husband and the wife.”  Kowalski citing Passalino v. Protective Grp. Sec., Inc., 886 So.2d 295, 297 (Fla. 4th DCA 2004).  However, the court also noted that the character of the proceeds may change if the parties intended to change the character of them.  Specifically, “a tenancy by the entireties can be terminated by the agreement of the owners, and “[t]he agreement need not be explicit” but can be inferred from the conduct of the parties.”  Id. At 297. 

At a hearing regarding the ownership of the account, Lorraine testified that she believed she and Leon each owned 50% of the account, which the special master found evidenced Lorraine and Leon’s intent to own a divisible part of the property and not the whole thereby destroying the entireties character of the property.  Additionally, Lorraine had sole control over the account, which also terminates the entireties character of property.  Id. At 298.

So, notwithstanding the fact that the account was in Lorraine’s sole name, based upon her testimony that the account was intended to be owned 50/50 by Lorraine and Leon, the trial court held (and the appellate court affirmed) that the previously-undistributed portion of Leon’s share of the account should be returned to his estate.

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