Dear Mr. Premack: I am thinking about making my Will. I know that
when I die, I want some of my money to go to my two daughters, and some to
my stepson (but not the same amount as my daughters). I have several CDs,
a money market account and checking accounts. I am also concerned about
getting older, and asked the bank if I could put my oldest daughter on my
accounts so she can pay my bills if I cannot. When she signed the bank’s
paperwork, I notice that all the papers said “with right of survivorship.”
The banker said they do all of their accounts that way, not to worry about
it. Is that the way it should be for me? Thank you. – W.B.
law provides several ways for ownership of a bank account to change when
an accountholder dies. The most traditional approach is to designate in
your Will how you desire the accounts to be divided. But Texas law also
provides that account ownership can be changed to other accountholder(s)
automatically via right of survivorship.
Right of survivorship is
a contractual agreement between at least three parties: the primary
accountholder (you), one or more secondary accountholders (like your
daughter), and the depository institution (the bank). The contract must be
signed by all accountholders to be valid.
Banks love survivorship
rights and their cousin, “pay on death” arrangements. However, that
affection is based on the bank’s ease and best interests. When one
accountholder dies, these arrangements allow the bank to turn the funds
over to the other accountholder or the beneficiary named in the contract,
and to be relieved of further liability. They know exactly what to do, can
do it quickly, and once it is done they have no further legal liability.
But what is best for the bank is not necessarily what is best for
you. For instance, you want some of your money to pass to your two
daughters and a lesser amount to your stepson. If the bank automatically
assigns right of survivorship on your accounts, then all the funds in
those accounts become the property of the sole daughter who is listed on
those accounts. She and she alone becomes owner of those funds. They are
no longer divided under the terms of your Will.
That is the vital
point. In a conflict between your Will and the contract with the bank,
your Will loses. The bank contract overrides your Will. The funds are
distributed in the way that is convenient for the bank, even if your Will
says they should be distributed in a different pattern.
does not require the bank to “do all their accounts that way” (with
survivorship or with a beneficiary designation). It is an option that is
right for some people and desperately wrong for others. The bank should
never force it on a depositor; they should be facilitating the depositor’s
best interests, not focusing on their own ease.
It is true that
for many people, accounts with right of survivorship or beneficiary
designations are a very good choice. For instance, a married couple whose
assets are all community property, and who want all the assets to pass to
the surviving spouse, can benefit greatly. When one of them dies, the
accounts belong to the survivor. There is no need to probate the Will to
access those accounts. The survivor need only present the death
certificate to the bank to be treated as the legal owner of the accounts.
But there are other situations when using these arrangements is a
bad choice. What if that married couple has an estate large enough to be
exposed to federal estate taxes? For them, survivorship rights that
contradict their Wills can cause them to lose a major tax break. They may
end up owing a huge tax bill that could have otherwise been avoided.
Your situation is another example: you want the funds divided in a very
specific manner. The bank wants to give them all to your oldest daughter.
Whose desire should be more important? Yours, of course. You should tell
the bank that using right of survivorship would contravene your Will and
that you do not want it.
Instead, you can ask the bank for a
“convenience account” (in which your daughter can access the funds, but
has no ownership and no survivorship rights) or a joint account without
survivorship rights. You can also have your lawyer write a durable power
of attorney for you, and then add your daughter to your account as
“agent”. The bank is fully empowered under Texas law to offer those
arrangements, and if they refuse then you should close your accounts and
go to a local bank that understands and follows Texas law.