In today’s world the vast majority of inherited wealth gets transferred from one generation to the next via nonprobate “will substitutes” that are not subject to the costs and delays of a court-supervised probate proceeding, are not controlled by a person’s will, and are not governed by our probate code. Referred to as the nonprobate revolution, it’s a trend that’s been accelerating for decades. And joint accounts are one of the most common will substitutes out there.
Joint Accounts vs. Convenience Accounts
The fact that you don’t need to hire an attorney to create a joint account makes them cheap and easy to use, but it also means that lots of people create them thinking all they’re doing is giving a family member access to their bank account to help them manage their finances, not ownership to all of it when they die. This second kind of account is known as a “convenience account” and it’s a common disability planning tool for elderly parents relying on one of their children for assistance with their finances.
The key distinction between joint accounts and convenience accounts is that there’s no right of survivorship for convenience accounts, so after mom or dad dies the money goes to their probate estate, not to the convenience signer.
Convenience accounts are statutorily authorized in Florida by F.S. 655.80, which defines a “convenience account” as “a deposit account, other than a certificate of deposit, in the name of one individual (principal), in which one or more other individuals have been designated as agents with the right to make deposits to and to withdraw funds from or draw checks on such account.”
Bank signature cards
As probate practitioners, usually all we have to do is review an account’s signature card to figure out what kind of account we’re dealing with. If the signature card says “joint account,” the inquiry usually ends there. The funds go to the survivor as a nonprobate transfer.
But what if we’re aware of facts strongly indicating that what the decedent really intended was a convenience account, not a joint account. Are we allowed to look outside the four corners of the bank’s signature card to comply with the decedent’s intent? That question was at the heart of the Larkins case.
Case Study
Larkins v. Mendez, — So.3d —-, 2023 WL 3485303 (Fla. 3d DCA May 17, 2023)
In this case the decedent, a widower, had three sons, only one of which lived locally. A few years after his wife died the decedent added his one local son to a bank account by signing a new signature card and checking the box marked “multiple-party account with right of survivorship.” And while there was a place on the signature card for the account to be designated as a “convenience account,” that designation box wasn’t selected. Both decedent and local son signed the card.
After the decedent died there was a dispute over the nature of the bank account. The trial court was asked to decide if it was a joint account (going to only one surviving son) or a convenience account (going to all three sons in equal shares as beneficiaries of the estate). After a four-day bench trial the trial court ruled it was a convenience account.
But why even have a trial if the signature card says it’s a joint account? Because F.S. 655.79 tells us that all a signature card does is create a rebuttable presumption as to the decedent’s intent, and that presumption can be overcome by clear and convincing evidence of contrary intent. In other words, the signature card’s a starting point, not the end of the story.
Can you look outside the four corners of an account’s signature card? YES
On appeal the losing side argued the trial court was barred as a matter of law from looking outside of the four corners of the account’s signature card to determine what kind of account it is. In other words, a court can’t consider parol evidence when deciding a joint-account case under F.S. 655.79. If that were the rule, the statute’s rebuttable-presumption standard would be nonsensical. So that’s not the rule, so saith the 3d DCA.
We reject Larkins, Jr.’s argument that the probate court erred by admitting and relying on parol evidence. Caputo v. Nouskhajian, 871 So. 2d 266, 269 (Fla. 5th DCA 2004) (holding that parol evidence is admissible to overcome the presumption that a decedent’s joint bank account is held with a right of survivorship). To ascertain Decedent’s intent as to whether the bank account was a convenience account, the probate court appropriately relied upon the extensive testimony of Decedent’s son Eric Larkins; the testimony of the Decedent’s neighbor who visited Decedent before his death and took contemporaneous notes of their conversation; and bank records showing how Larkins, Jr. handled the bank account both before and after his father died.
But you’ll need clear and convincing evidence to overcome a signature card
So we’re not limited to the four corners of the signature card when litigating one of these cases. But the signature card isn’t meaningless, you need “clear and convincing” evidence to overcome it’s account designation. That’s a higher, much more demanding standard of proof than what’s usually required in civil cases. Here’s how the 3d DCA defined that standard of proof:
Clear and convincing evidence is defined as evidence “that is precise, explicit, lacking in confusion, and of such weight that it produces a firm belief or conviction, without hesitation, about the matter in issue.” In re Standard Jury Instructions in Civil Cases – Report No. 09-01, 35 So. 3d 666, 726 (Fla. 2010); see Edwards v. State, 257 So. 3d 586, 588 (Fla. 1st DCA 2018).
So did the winning side meet its burden of proof in this case? Yup, so saith the 3d DCA:
This properly admitted and considered evidence constitutes clear and convincing proof that Decedent intended, and Larkins, Jr. understood, that the account be a convenience account, rather than a joint account with a right of survivorship, as provided on the October 17, 2006 signature card. We, therefore, affirm the account order.
What’s the takeaway?
Facts matter. No matter how much we all crave certainty, you can’t assume a signature card’s going to control how a decedent’s bank account gets distributed if there’s a dispute. Like wills, signature cards can be challenged on undue influence and fraud grounds. What’s often overlooked is that signature cards can also be challenged as simply being a mistake; as in, the decedent checked the wrong box, it’s not what he intended. By the way, there’s a similar remedy available under Florida law to fix drafting mistakes in trust agreements.
But fixing mistakes (read: re-writing documents after the fact) goes against the grain of abiding by the plain meaning of unambiguous testamentary instruments, so the law requires “clear and convincing” evidence of the mistake — a heightened level of proof we don’t often see in cases where the most important witness (the guy who signed the signature card and funded the account) — is dead. In other words, these are circumstantial evidence cases. The Larkins opinion gives us a rare case study demonstrating what circumstantial “clear and convincing” evidence looks like in real life. This is gold for practitioners.
What’s a “will substitute” and why are joint accounts a classic example
I’m a big fan of Prof. Langbien’s Nonprobate Revolution article, which was first published over forty years ago in 1984, and is referenced at the beginning of this post. The probate-avoidance trends Langbien spotted and wrote about then have only accelerated over the ensuing decades. As a probate practitioner, once you know what you’re looking at, you’ll realize these will substitutes are everywhere. So for those of you wondering what exactly is meant by a “will substitute,” and why joint accounts are a classic example, here’s an excerpt from the Langbien article that does a good job of explaining this point.
Four main will substitutes constitute the core of the nonprobate system: life insurance, pension accounts, joint accounts, and revocable trusts. When properly created, each is functionally indistinguishable from a will – each reserves to the owner complete lifetime dominion, including the power to name and to change beneficiaries until death. These devices I shall call “pure” will substitutes, in contradistinction to “imperfect” will substitutes (primarily joint tenancies), which more closely resemble completed lifetime transfers. The four pure will substitutes may also be described as mass will substitutes: they are marketed by financial intermediaries using standard form instruments with fil-in-the-blank beneficiary designations.
The typical American of middle- or upper-middle-class means employs many will substitutes. The precise mix of will and will substitutes varies with individual circumstances – age, family, employment, wealth, and legal sophistication. It would not be unusual for someone in mid-life to have a dozen or more will substitutes in force, whether or not he had a will. …
More commonly, the joint bank account – whether savings or checking – is manipulated to do the work of a will. In theory, joint accounts differ from other pure will substitutes: they look more like gifts than like wills. When the owner of property arranges to take title jointly, he supposedly creates a present interest in his donee-cotenant. In the prototypical joint tenancy of realty, the donee receives an interest equal to the donor’s, and the donor loses the power to revoke the transfer. Moreover, the commonality-of-use rule requires that the cotenants act together in order to transfer the realty. Joint accounts of personalty, however, “differ from the true joint tenancies as defined in [real] property law, for by the privilege of withdrawal either [cotenant] may consume the account.” Accordingly, a depositor may name a cotenant on a bank account but deal with the account as though it were his own. The cotenant may not even know that he has been designated. Depending on his contract with the bank, the depositor may revoke and alter cotenancy designations as freely as he would beneficiary designations under any of the other will substitutes. He may also achieve the same result by closing the account, withdrawing the funds, and opening another account as he pleases. In this way, joint accounts may be used to approximate the incidents of a will; the cotenancy designation is effectively revocable and ambulatory.