San Antonio Express-News
July 18, 2006

Disclaiming a Survivorship Account

copyright 2006, Paul Premack

Dear Mr. Premack: Several years ago my parents added me to their bank accounts as joint tenant with right of survivorship. My father is now deceased and my mother is incapacitated, though I am agent in her durable power of attorney. I'm also designated as executor in her Will which instructs me to divide her substantial estate equally among her children and grandchildren. I understand the “right of survivorship" means I inherit the funds remaining in my mother's bank accounts when she dies. Instead, I want all the heirs to receive what she specifies in her Will. I don't want to receive the funds and then gift them out, because there are gift tax implications. Could I use a “disclaimer" to decline ownership of the bank funds and distribute these assets according to my mother's Will? – W.M.

Title to assets can pass to heirs in a “testamentary” or in a “non-testamentary” fashion. Setting up rights of survivorship on a bank account makes it non-testamentary, so that the named survivors receive the funds directly, without reference to the decedent’s Will. A right of survivorship takes priority over the Will; if there is a conflict between them the Will loses.

When your parents listed you as joint tenant with right of survivorship and your father died, you became owner of half of his community property interest in the accounts. Your mother already owned half, and also received half of her husband’s share, so she owns three-quarters of the accounts and you own one-quarter already. The same right of survivorship will give you all of her interest, making you 100% owner, when your mother dies.

You want to see that her larger goal is met: equal division of the accounts among all her children and grandchildren. If you simply accept ownership of the funds, you could turn around and gift shares to the others. But if the amounts exceed $12,000 per person then you’ll have to file a gift tax return and use up part of your own lifetime exemption to eliminate the taxes.

You ask if Texas law allows you to use a disclaimer. Yes, and with a disclaimer the accounts pass as if you had died before your mother. As a consequence, there would have been no “survivor” to receive the accounts, and they would be restored to testamentary status. Her Will would regain dominance so the funds could indeed pass to all the heirs.

Of course, having testamentary status means that the bank will not release the funds until her Will goes through probate court. So the disclaimer route achieves your goal but complicates the process.

Instead of using a disclaimer, consider altering the agreement she has with the bank. You can use the durable power of attorney while she is still alive. One possible alteration: eliminate the right of survivorship and substitute a pay-on-death designation. You can mimic her Will in that designation by listing her children and grandchildren by name and specifying what percent they each receive. When she dies, her wishes are carried out in a non-testamentary, non-probate fashion.

A more flexible alternative: if the durable power of attorney grants you authority to create a trust for her, have an attorney write a trust that mimics the terms of her Will. A trust allows deeper contingency planning than a pay-on-death arrangement in case any of her children or grandchildren predecease her. You would then transfer her accounts to the trust so when she dies her goals are met in a non-testamentary, non-probate fashion.