Dear Mr. Premack: Our 95-year-old great uncle has numerous CD with banks in Texas. In Feb 2008 he choose to move into our home so we could take care of him. Last year he changed ownership of some CD’s to multi-party ownership/right of survivorship and some to POD designation naming my husband and me each as 1/3 owners of the accounts. Recently, he is considering investments that will include these CD’s we are co-owners of. We do not agree with the type of investments he is considering and would like to take our parts of the CD’s out of these accounts. My question: Can my husband and I go to the Banks holding the CD’s and withdraw or parts of the accounts? – JW
Your uncle was clearly the sole owner of the funds in these accounts before your names were added to the accounts. He is the one who earned the money. As owner, he was at liberty to decide what banks or what investments would hold his funds. And he was at liberty to add your names to the accounts.
According to your letter, he “changed ownership” by 1) making some accounts joint with rights of survivorship and 2) making some accounts pay-on-death (POD) to you. What was the real legal effect of adding your names, and what rights do you have as a consequence?
Under section 438 of the Texas Probate Code, while all parties to a joint account are living, the account is owned by the parties in proportion to the net contributions by each to the sums on deposit (unless there is clear and convincing evidence of a different intent). That means that if your uncle owned the money on deposit before you were added to the account, he still owns the money on deposit. There is no presumption that a gift was made just because your names were added to the account.
If fact, your legal rights are limited to the specific terms contained in the agreement you signed at the bank. We all usually think of that agreement as the “signature card” but it specifies that you 1) can make deposits or withdrawals, and 2) that upon your uncle’s death, you then become owner of the funds by rights of survivorship. You are not the owner of the funds until the date of his death.
Even so, you do have the legal right to withdraw the funds. However, when you do so, you are withdrawing funds that still belong to your uncle. The withdrawals must be for his benefit – for instance, to pay his debts or to transfer funds to some other account he owns. You are not owner of the funds, so you cannot legally withdraw the funds to put them into a different account over which your uncle has no control or ownership.
On the other hand, if there is clear and convincing evidence that your uncle intended to gift you actual ownership of ⅔ of these joint accounts, then you do own that share. Clear and convincing evidence would be something like a notarized document signed by your uncle stating that he intends that adding your names to the accounts is actually a gift to you, followed up by a gift tax return filed by him with the IRS. If something that clear exists, then you do have the right to withdraw your part of the joint accounts to invest them wherever and however you choose.
The POD accounts do not give you the same leeway. Section 438 of the Texas Probate Code says that POD accounts belong entirely to your uncle during his lifetime, and that you have no rights until he dies. You are not co-owner of the POD accounts. You cannot make withdrawals from the POD accounts. You cannot invest those funds elsewhere in your own name.
Paul Premack is a Certified Elder Law Attorney and a Five Star Wealth Manager (Texas Monthly Magazine 2009-2013) practicing estate planning and probate law in San Antonio.
Original Publication: San Antonio Express News, November 5, 2010