Chapter F. Bank Accounts

• Jurisdiction: Washington

F BANK ACCOUNTS

F.1. In General

One very useful and easily employed type of will substitute is a bank account that can be added to or withdrawn from by the depositor during his or her lifetime, but that upon death

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automatically passes to his or her chosen beneficiary without the intervention of probate or the need for a will. Several devices fit this general description, although they work in different ways and with important distinctions in their effects during the depositor's lifetime. All are now included under a statute that attempts to bring some order out of the somewhat chaotic case and statutory law that previously governed them. This section will explain the former law and the effect of the current statutory scheme with respect to each device. Of course, when not superseded by the current statute, the former law would still apply.

F.2. Joint and Survivorship Accounts

F.2.a. Description and Effect

At common law a joint bank account with a right of survivorship was, basically, a deposit account held by two or more individuals in a form of joint tenancy, with the right of each to deposit or withdraw all or any of the account during the lifetimes of the joint owners and the right of survivorship upon the death of one of them.¹⁵⁸ The account was not a true joint tenancy, primarily because of the right of each depositor to withdraw the entire account.¹⁵⁹

F.2.b. Operation

F.2.b.(1) Prior Law

(a) In General. To the extent that there was a joint tenancy created by a joint bank account, most (but not all) of the common-law conditions of that relationship applied, as set out elsewhere.¹⁶⁰ For example, each joint tenant was said to have an "undivided moiety of the whole, and not the whole of an undivided moiety"; that is, each had a complete interest in the whole.¹⁶¹ Upon the death

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of a joint tenant, the surviving joint tenant became the owner of the decedent's undivided interest by operation of law,¹⁶² unaffected by the decedent's will (or lack of one).¹⁶³ Ultimately, the question of whether a joint tenancy existed was a matter of the intention of the depositors.¹⁶⁴

Because title (with the right to possession and enjoyment) vested immediately upon the deposit into the joint tenancy account, any rights or procedures that depended upon a transfer at the decedent's death, or a new title being established at that time, did not apply¹⁶⁵ Because the proceeds of the account did not pass through probate and were not part of a decedent's estate, they were not subject to whatever effects the language of the decedent's will or inclusion in the estate might otherwise have had.¹⁶⁶ As expressed in one case, the surviving joint tenant did not obtain any new rights by the decedent's death but was "merely relieved thereby from the further interference of the co-tenant."¹⁶⁷

(b) Former Statutes. Prior to 1982, there were separate statutory provisions for the determination of the existence and ultimate operation of survivorship accounts in commercial banks,¹⁶⁸ credit unions,¹⁶⁹ mutual savings banks,¹⁷⁰ and savings and loan associations.¹⁷¹ Unfortunately, these various statutes were passed at different times, with different theories of their purposes and effects, and employing slightly different language. As a result,

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they were interpreted to treat joint deposits in one type of financial institution differently from those in other types, even though the deposits and the institutions would generally appear identical to the lay depositor.

Most of these statutes¹⁷² provided for a conclusive presumption¹⁷³ of joint tenancy when a dispute arose following the death of one joint tenant, provided that there was no fraud or undue influence proven; whereas the statute relating to savings and loan associations did not contain such a conclusive presumption.¹⁷⁴

Other problems of formation and proof involved the type of writing (if any) necessary to create the joint tenancy,¹⁷⁵ the persons to whom the presumptions applied,¹⁷⁶ and the nature of the contract between the joint tenants and the bank and among the joint tenants themselves.¹⁷⁷

It was not always clear whether a joint account with right of survivorship was intended to be created, especially because the

The conclusive presumption applied only when there were surviving depositors. The extent of the nondepositor surviving tenants interest, however, would be determined by the intent of the depositor tenant. In re Estate of Fox, 51 Wn. App. 498, 754 P.2d 690 (1988); In re Oneys Estate, 31 Wn. App. 325, 328, 641 P.2d 725, review denied, 97 Wn.2d 1023 (1982).

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deposit agreement forms used by banks can vary considerably. In theory, however, the intention of the depositor controlled, and both extrinsic evidence of intent and the language of the agreement (account card) were relevant to this determination.¹⁷⁸

Because of both the specific injunction of the statutes and the general rules regarding contract formation, the courts would not enforce a joint tenancy that resulted from the exercise of fraud or undue influence.¹⁷⁹ The analysis of undue influence followed the same principles as that for undue influence in the execution of a will.¹⁸⁰

Community property rights were not affected by the funds being deposited in a joint account, either with the depositor's spouse or with a third party, except as the community property laws might dictate the ultimate disposition of the funds.¹⁸¹

F.2.b.(2) The Financial Institution Individual Account Deposit Act

Effective July 1, 1982, all of the above statutory provisions and their interpretations were superseded, as all of the separate statutes governing joint deposits in the various financial institutions were repealed, and a new comprehensive statute, the Financial Institution Individual Account Deposit Act,¹⁸² Title 30 RCW, was substituted, with a view toward rendering the law simplified and consistent among all financial institutions and all similar forms of deposit.¹⁸³ Title 30 was in turn replaced and recodified as the Washington Commercial Bank Act, Title 30ARCW, as of January, 2015.¹⁸⁴

The Act does not make many radical changes in the law respecting joint accounts as set out above, but it does clarify and simplify that law. Although no attempt will be made here to cover every detail of the Act, the major points are set out below.

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The Act applies to all financial institutions authorized to do business and accept deposits in Washington, under state or federal law.¹⁸⁵ (For convenience, the term "bank" will be used in the following discussion, although the Act uses the term "financial institution.") It governs all types of accounts into which an individual might deposit funds: single, joint, survivorship, nonsurvivorship, trust, payable-on-death (P.O.D.), and agency.¹⁸⁶ The contract forming a particular account must be in writing and must be signed by all individuals who have a current right to payment of funds from the account.¹⁸⁷ Minors, incompetents, and married persons (regardless of the separate or community nature of the funds deposited) all may enter into enforceable contracts of deposit.¹⁸⁸

In what may be the major clarification of prior law, when a joint account with a right of survivorship (a "joint account") has been opened, the funds on deposit belong during their joint lifetimes to the depositors "in proportion to the net funds owned by each depositor on deposit in the account, unless the contract of deposit provides otherwise or there is clear and convincing evidence of a contrary intent at the time the account was created."¹⁸⁹ Under prior law, either joint tenant depositor could appropriate (withdraw) all of the account.¹⁹⁰ Although there was some indication that the withdrawing depositor need not account to the other for the latter's share,¹⁹¹ this was apparently not the case: the funds could be withdrawn, but the other joint depositor's interest could not thereby be affected without consent.¹⁹² Now it is expressly stated that, at least as between the

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depositors, although each may have the power to withdraw all of the funds in the joint account,¹⁹³ the right to the funds is dependent upon the deposit agreement and is presumed limited to the depositor's proportionate share.¹⁹⁴ There is a "rebuttable presumption that joint accounts with right of survivorship do not give a nondepositing party any present interest in the account funds."¹⁹⁵ Thus although one joint depositor, who had put none of the funds into the account, had the right and power to withdraw the funds without the permission of the codepositor who had put the money into the account, the funds still belonged to the latter (absent evidence of a gift) and could not legally be appropriated for the nondepositor's benefit.¹⁹⁶

It would seem that because funds are now expressly presumed owned separately and not jointly during the depositors' lifetimes, there is not only no joint tenancy created but there is no predeath transfer at all,¹⁹⁷ and at death there is a transfer to the survivor of property that until then belonged to the codepositor, all contrary to prior law.¹⁹⁸

The key to the "will substitute" aspect of the Act is the provision that upon a joint depositor's death, the remaining proceeds of the account belong to the surviving depositor(s) "unless there is clear and convincing evidence of a contrary intent at the time the account was created."¹⁹⁹ Regardless of who deposited the funds, the surviving

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depositor is entitled to whatever remains in the account. Thus when one joint depositor pledged the account's funds as collateral for a loan and then died still owing the money, the bank was not able to enforce the pledge against the surviving codepositor, who had not signed the security agreement.²⁰⁰ The borrower could pledge only what she owned, and she owned only a lifetime interest.²⁰¹ But the rule is a...