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Joint Bank Account Litigation & Pay on Death Disputes

While some people may think that probate litigation is limited to contesting a decedent’s last will and testament, some assets can be removed from a decedent’s estate by acts which actually start, or occur, during life. How is this possible? Well, Florida estate lawyers often do a lot of pre-death estate planning or gift planning, sometimes referred to as inter vivos gifts. There are also incomplete gifts like Florida pay-on death or transfer-on-death designations. Many times, these POD or TOD or Totten Trusts involves hundreds of thousands of dollars in joint bank accounts in Florida, or millions of dollars in stocks and bonds or mutual funds in a brokerage account. And all this money goes automatically? Yes. And it avoids probate? It can.

So, imagine if you are a family member or an estate beneficiary, or a residuary beneficiary of your parent’s revocable trust. You expect to inherit something, right? You expect that there is money in your parent’s estate or living trust, right? Well, what if you learned that prior to death, there was a change in the title to a bank account or mutual fund or IRA which named, say, a caregiver, or neighbor, or “friend” as pay on death beneficiary? And there was no estate to probate or nothing in your mom or dad’s revocable living trust?

Late in 2015, an interesting case was decided by the First District Court of Appeal in Keul v. Hodges Blvd. Presbyterian Church, 180 So. 3d 1074 (Fla. 1st DCA 2015), which gave a nice overview of how the trial and appellate courts reached their decisions returning credit union funds to an estate.

In Keul, the Hodges Blvd. Presbyterian Church, the church filed an objection to the estate inventory and a petition to remove the decedent’s former caregiver as personal representative of her estate. At the time of decedent’s death, funds from the decedent’s credit union accounts that had been designated payable-on-death (“POD”) had been disbursed to the former caregiver, her son, daughter, and former daughter-in-law.

The decedent and her husband had executed a family trust and pour over wills shortly before the husband died. The trust provided that if the husband predeceased his wife, then, upon the wife’s death, the entire estate would go to the church. Upon her death, the wife had $333,497.56 in credit union accounts that she had owned jointly with her husband before he predeceased her.

Approximately a week after the death of the wife, the former caregiver was appointed personal representative of the estate, and the credit union disbursed the funds pursuant to the POD designation, which left them 75% to the caregiver, 10% each to her son and daughter, and 5% to her former daughter-in-law.

The church filed an objection to the estate inventory, asserting that the former caregiver had wrongfully failed to include the credit union accounts in the inventory, and petitioned to remove the former caregiver as the personal representative.

Two disinterested witnessed testified that that it was always the wife’s intent to leave her entire estate to the church, and in fact no document was executed indicating otherwise until a few days before her death (the POD designation). The former caregiver testified that the decedent asked her to get a POD form from the credit union and fill it out to designate the caregiver and her family as beneficiaries.

In rejecting the former caregiver’s arguments, the Keul court stated:

Florida law allows a POD designation to be invalidated for undue influence. Florida has a legitimate public policy interest in preventing abuse of fiduciary or confidential relationships, and has codified this interest and protected it through case law. See, e.g., § 733.107, Fla. Stat. (2013) (implementing “public policy against abuse of fiduciary or confidential relationships”); In re Estate of Carpenter, 253 So.2d 697, 701 (Fla.1971) (“[I]f a substantial beneficiary under a will occupies a confidential relationship with the testator and is active in procuring the contested will, the presumption of undue influence arises.”). Id. at 1076.

The Court went on to explain:

A POD designation or Totten Trust, like a transfer-on-death (TOD) provision, is a “will substitute” that does not transfer ownership of funds until the death of the account holder. e.g., Blechman v. Estate of Blechman, 160 So.3d 152, 157 (Fla. 4th DCA 2015) (recognizing the existence of these and other will substitutes). These are generally considered inter vivos transfers, although they also have attributes of testamentary transfers because they have no effect until the death of the owner. Under Florida law, they are subject to challenge on grounds such as undue influence, fraud, duress, and overreaching. See, e.g., Cripe v. Atl. First Nat’l Bank of Daytona Beach, 422 So.2d 820, 823 (Fla.1982) (finding a joint account invalid as the result of undue influence); Estate of Kester v. Rocco, 117 So.3d 1196, 1200 (Fla. 1st DCA 2013) (applying undue influence analysis to ownership of POD accounts, among others); Laushway v. Onofrio, 670 So.2d 1135, 1136 (Fla. 5th DCA 1996) (holding probate court had authority to invalidate inter vivos gifts procured by undue influence); Fogel v. Swann, 523 So.2d 1227, 1229 (Fla. 3d DCA 1988) (holding that Carpenter applies to inter vivos transfers); Majorana v. Constantine, 318 So.2d 185, 186 (Fla. 2d DCA 1975) (applying will contest principles to inter vivos gifts); Pate v. Mellen, 275 So.2d 562, 565 (Fla. 1st DCA 1973) (On Petition for Rehearing) (holding that Carpenter applied to dispute about validity of decedent’s signatures on inter vivos gifts). Id. at 1076-1077.

The trial court’s Order directing the return of the disbursed credit union funds to the estate by the former caregiver and her family was affirmed by the appellate court. In the event you are concerned about improper designation changes on bank or credit union accounts, speak to an experienced probate litigation attorney.

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