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What Are The Rights And Responsibilities Of Joint Bank Account Owners To Each Other?

Imagine two people owning a house as joint tenants. Both parties can enter and exit the premises as they please. Both parties have an undivided interest in the property and have access to every corner of the parcel. Finally, if one of the parties should die, the surviving party becomes the sole owner of the entire premises. Likewise, the joint owners must respect the other party's access to the home and cannot take action inconsistent with that co-owner's rights (e.g. cannot lock out the other tenant or burn the house down). The obligations to one another are very clear.

How does this example apply to joint owners of a bank account? Is any party free to deposit or draft against the account as they see fit?  Does one party have the unfettered right to withdraw and convert all of the funds? Does any one owner have the right to every last dollar in the account? What remedies do the other co-owners have if everything is taken?

MCL 487.703 provides the following rules for deposits in joint accounts at a financial institution:

  • "When a deposit shall be made, in any bank by any person in the name of such depositor or any other person, and in form to be paid to either or the survivor of them, such deposits thereupon and any additions thereto, made by either of such persons, upon the making thereof, shall become the property of such persons as joint tenants, and the same together with all interest thereon, shall be held for the exclusive use of the persons so named and may be paid to either during the lifetime of both, or to the survivor after the death of 1 of them, and such payment and the receipt or acquittance of the same to whom such payment is made shall be a valid and sufficient release and discharge to said banking institution for all payments made on account of such deposits prior to the receipt by said bank of notice in writing not to pay such deposit in accordance with the terms thereof."
  • "When a deposit has been made, or shall hereafter be made, in any banking institution transacting business in this state, in the names of 2 or more persons, payable to either or the survivor or survivors, such deposit or any part thereof or any interest or dividend thereon and any additions thereto, made by any 1 of the said persons, shall become the property of such persons as joint tenants, and the same shall be held for the exclusive use of the persons so named and may be paid to any 1 of said persons during the lifetime of said persons or to the survivor or survivors after the death of 1 of them, and such payment and the receipt or acquittance of the same to whom such payment is made shall be a valid and sufficient release and discharge to said banking institution for all payments made on account of such deposits prior to the receipt by said bank of notice in writing not to pay such deposit in accordance with the terms thereof."
  • "The making of the deposit in such form shall, in the absence of fraud or undue influence, be prima facie evidence, in any action or proceeding, to which either such banking institution or surviving depositor or depositors is a party, of the intention of such depositors to vest title to such deposit and the additions thereto in such survivor or survivors."

This statute creates both the right of equal access to the account among the joint owners and the right of survivorship. Once funds are deposited in the joint account, the bank is completely released from liability with respect to how the joint tenants will use those funds (unless there is a written request not to make payment from said account). It is up to the parties to determine their own restrictions or conditions that they would put on the use of the account.

Of course, this statute operates on the assumption that the joint tenants are equal contributors and that the parties own a proportionate share of the funds. This is often not the scenario. In many cases, a person may add a joint tenant to a financial account where he or she is the sole source of deposits but desires an additional owner for his or her convenience. For example, when the primary owner is incapacitated, the joint tenant can continue to deposit in or draft against the account to manage that owner's finances until he or she can regain control (negating the need for a durable power of attorney). Another purpose might be to add the joint tenant with the intention that he or she will be the successor to the account's funds when the primary owner dies (negating the need for the bank account to pass through probate court). This tactic is also known as the "poor man's will". In this relationship, the joint tenant is clearly not considered an equal partner but rather serves an ancillary purpose for the benefit of the primary owner. However, even over the primary owner's objections, does the addition of the joint tenant vest the right to access every last dollar in the account as MCL 487.703 might permit?

Under Michigan case law, the presumption of equal use and equal access is rebuttable. "The rights are determined by the intent of the depositor at the time of deposit." In re Pitre, 202 Mich App 241, 244; 508 NW2d 140 (1993). The "realities of ownership", not the form of the account, control in dispute between parties to the joint tenancy. Esling v City Nat'l Bank & Trust of Battle Creek, 287 Mich 571, 577; 270 NW 791 (1936).

On July 16th, 2019, the Michigan Court of Appeals determined in Robert G. Lewis Estate v Rosebrook, __ Mich App __; __ NW2d __ (2019)(Docket No. 343765) that a withdrawing co-owner of a joint financial account must take the funds as a co-owner and, therefore, must use the funds consistent with the other co-owner's rights. In that case, the decedent and his long-term partner were a couple for approximately 24 years but never married. The parties open and maintained three joint financial accounts together, although all three were primary (if not exclusively) funded by the decedent. The funds had been primarily used for the day-to-day expenses of the couple, "sometimes after consulting each other and sometimes not". Eventually, the decedent became ill and had to enter a long-term care facility. Shortly after that, the couple ended their relationship. The long-term partner subsequently went to the bank and withdrew nearly all of the funds from the three joint accounts without the decedent's knowledge or permission and placed them into her own separate accounts. The decedent's personal representative sued the long-term partner for claims of conversion, breach of fiduciary duty, constructive trust and oral trust over the funds.

The probate court decided that the decedent and the long-term partner were co-owners of the accounts and had equal interests in them since the long-term partner had the right to make withdrawals and transfers not just limited to the decedent's convenience. Likewise, she had the absolute right to withdraw and retain all of the funds as a joint tenant. If the long-term partner had not withdrawn the funds before death, she would have been successor to the funds anyway. As a result, the judge decided that the personal representative's claims are without merit.

The Michigan Court of Appeals disagreed. Although the probate court had recognized that the long-term partner had the right to withdraw all of the funds from the three accounts, the boundary was crossed when the long-term partner believed she had "the right to retain and use the funds for her own benefit despite" the decedent's co-ownership rights. During the course of their relationship, the decedent and long-term partner withdrew funds to pay for expenses in their capacity as co-owners. This was the "reality of the ownership" of the money. While the parties had undivided interests in all three accounts, each party's proportional share of 50%/50% can be determined from their intentions. As an equal owner that had appropriated substantially all of the funds, the long-term partner could be liable for returning any amounts that exceeded her 50% proportionate share under a conversion theory. Her use of the monies was clearly inconsistent with co-ownership of the account, so the case was remanded to the probate court for a determination of the decedent's share in the account.

In conclusion, joint tenants of financial accounts do not have free reign to use substantially all of the funds for their own personal use if done so in a manner inconsistent with the other co-owner's interest. Exceeding these limits can lead to potential civil liability to the other joint tenants. If you have additional questions about joint property or require legal representation, then do not hesitate to contact the experienced attorneys at Kershaw, Vititoe & Jedinak PLC.

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