Joint bank accounts and other property transfers to survivors

PART 1

This article is the first part of a two-part series of about joint bank accounts and other kinds of ownership of bank accounts and investments. We have seen many avoidable cases of error, fraud, and abuse over the years. In many cases, people created accounts without understanding their choices. They expected bank or investment company representatives to understand their goals and warn them about legal traps and pitfalls, but banks and other financial institution employees cannot read minds and give legal advice. You must know that consequences of your own banking and investment decisions.

Coownership

We call two or more people listed as co-owners of anything "cotenants." Unmarried cotenants can own assets as tenants in common (often abbreviated as "TIC") or joint tenants with rights of survivorship (often abbreviated as "JTWROS" or "JTEN"). Indiana law presumes that cotenants of a bank or investment account are joint tenants with rights of survivorship unless the account records specify otherwise. The law presumes that cotenants of real estate are tenants in common unless the cotenants are married to each other at the time that they of acquire the real estate, and we call a married couple's cotenancy tenancy by the entirety (often abbreviated as "TBE"). The law also presumes a joint tenancy with rights of survivorship (JTEN) when a married couple acquires tangible personal property (stuff other than land that you can touch and move -- more information about tangible and intangible property appears in our blog article called Untouchable Stuff (Intangible Property)).

Life Estate and Remainder Interests

A real estate owner can transfer ownership of real estate to a co-owner while reserving the right of the transferring owner to use and control the real estate for that owner's lifetime. The reserved use and control right is a "life estate" and the transferred ownership is the "remainder interest." The life estate owner, called the "life tenant," can live in a house on the real estate and collect rental income from farm land. The remainder interest owner has no right to use the real estate during the life tenant's lifetime, but no one can interfere with the remainder interest owner's right to have complete and unlimited ownership of the real estate after the life tenant's death.

Survivorship

The papers that you sign to open a new bank account may determine who gets your money when you die. When cotenants own an asset as tenants in common (TIC), the share of a deceased cotenant passes to the deceased person's heirs or the beneficiaries of the person's last will and testament. If the cotenants are joint tenants with rights of survivorship (JTEN) or tenants by the entirety (TBE), the surviving cotenant will receive the deceased cotenant's share regardless of whether the deceased cotenant left a last will and testament. An individual or cotenants can have an additional kind of ownership known as Payable on Death (usually a bank account abbreviated "POD") or Transfer on Death (real estate and most other assets other than IRAs, life insurance policies, and bank accounts, abbreviated "TOD") in which the owner identifies one or more beneficiaries on the account ownership records by adding the applicable "POD" or "TOD" after the owner's name and before the beneficiaries' names (for example, Kermit Frog POD Bull Frog).

Stay Tuned For Part 2

Our next article will conclude this topic. We encourage readers to ask questions or suggest ideas for other topics by posting comments on our blog at www.HawkinsLaw.com or on our Facebook page, tweeting to Jeff Hawkins on Twitter (@HawkinsLawPC) or calling Hawkins Law PC at 812-268-8777.