Who owns the funds in a joint bank account in Michigan?

Simon PLC Attorneys & Counselors – February 2023 Memorandum

Who owns the funds in a joint bank account in Michigan? 

The “realities of ownership”. Does the addition of a joint tenant on a bank account vest not only the right to access every last dollar in the account but also vest all funds to the surviving joint owner as MCL §487.703 might permit?

Michigan law provides significant guidance in resolving disputes over the entitlement and disposition of personal property, including assets held under a joint account arrangement in a financial institution. Under Michigan’s Payment of Deposits Act, specifically the Joint Ownership Statute, MCL §487.703, a presumption exists that the property, held in a joint account with the right of survivorship is, in the absence of fraud or undue influence, intended to vest in the surviving joint owner. As a result, the law presumes that the creator of a joint account arrangement intended for the later-added individual(s) to co-own all funds, regardless of the original source of the account’s funds. Depending on the circumstances, this presumption may represent a deviation from the account creator’s actual intent.

The statute creates both the right of equal access to the account among the joint owners and the right of survivorship. Once funds are deposited in the joint account, the bank is completely released from liability with respect to how the joint tenants will use those funds (unless there is a written request not to make payment from said account). It is up to the parties to determine their own restrictions or conditions that they would put on the use of the account. Of course, this statute operates on the assumption that the joint tenants are equal contributors, own a proportionate share of the funds, and have equal rights to access and use the funds. However, this is often not the case and consequently, it leads to a litany of challenges that leave the Court to decide the parties’ or the deceased co-owner’s intent regarding the account. Most commonly, these issues arise following significant events like the death or incapacity of the account creator, the ending of the relationship of the joint tenants, or a major withdrawal of funds by the individual later added to the account.

Recent cases, however, have provided guidance on how to overcome these challenges. As with most presumptions, it may be overcome by clear and convincing evidence. Lewis Estate v. Rosebrook, 329 Mich App 85 (2019). Under Michigan case law, the presumption of equal use and equal access is rebuttable. “The rights are determined by the intent of the depositor at the time of deposit.” In re Pitre, 202 Mich App 241, 244 (1993). The “realities of ownership”, not the form of the account, control in dispute between parties to the joint tenancy. Esling v City Nat’l Bank & Trust of Battle Creek, 287 Mich 571, 577 (1936).

In the case of Lewis Estate, the Michigan Court of Appeals determined that a withdrawing co-owner of a joint financial account do not have free reign to use substantially all of the funds for their own personal use if done so in a manner inconsistent with the other co-owner’s interest. Exceeding these limits can lead to potential civil liability to the other joint tenants. In the Lewis Estate case, the decedent and his long-term partner were a couple for approximately 24 years but never married. The parties opened and maintained three joint financial accounts together, although all three were primary (if not exclusively) funded by the decedent. The funds had been primarily used for the day-to-day expenses of the couple, “sometimes after consulting each other and sometimes not”. Eventually, the decedent became ill and had to enter a long-term care facility. Shortly after that, the couple ended their relationship. The long-term partner subsequently went to the bank and withdrew nearly all of the funds from the three joint accounts without the decedent’s knowledge or permission and placed them into her own separate accounts. The decedent’s personal representative sued the long-term partner for claims of conversion, breach of fiduciary duty, constructive trust, and oral trust over the funds. The probate court decided that the decedent and the long-term partner were co-owners of the accounts and had equal interests in them since the long-term partner had the right to make withdrawals and transfers not just limited to the decedent’s convenience. Likewise, she had the absolute right to withdraw and retain all of the funds as a joint tenant. If the long-term partner had not withdrawn the funds before death, she would have been successor to the funds anyway. As a result, the judge decided that the personal representative’s claims were without merit. On appeal, however, the Michigan Court of Appeals disagreed. Although the probate court had recognized that the long-term partner had the right to withdraw all of the funds from the three accounts, the boundary was crossed when the long-term partner believed she had “the right to retain and use the funds for her own benefit despite” the decedent’s co-ownership rights. During the course of their relationship, the decedent and long-term partner withdrew funds to pay for expenses in their capacity as co-owners. This was the “reality of the ownership” of the money. While the parties had undivided interests in all three accounts, each party’s proportional share of 50%/50% can be determined from their intentions. As an equal owner that had appropriated substantially all of the funds, the long-term partner could be liable for returning any amounts that exceeded her 50% proportionate share under a conversion theory. Her use of the monies was clearly inconsistent with co-ownership of the account, so the case was remanded to the probate court for a determination of the decedent’s share in the account. 

The “realities of ownership” fell on opposite ends of the spectrum in Allan Deschane v. Tracy Klug, Case No. 360677, Michigan Court of Appeals (December 15, 2022). In Deschane, the parties started dating in 2008 and then chose to live together in a house that defendant owned.  Plaintiff and defendant had children together and combined their resources.  In April 2020, defendant used inherited money that had been transferred by wire into the parties’ joint bank account to purchase another home, which was titled only in her name.  Three months later, defendant ended the relationship and asked plaintiff to leave the new home.  That prompted plaintiff to file suit alleging that defendant had defrauded him and in reliance on the reasoning of Lewis Estate, he was entitled to a share of the defendant’s inheritance that was deposited into the parties’ joint bank account.  On appeal, the Court of Appeals upheld the lower court’s decision in favor of the defendant. The Court found that the defendant simply had $80,000 in her inheritance from her grandfather transferred by wire into their joint account and then she used those funds, after informing the plaintiff of her plans, to purchase the home to share with him.  Unlike in Lewis Estate, Rosebrook surreptitiously withdrew all the money from the joint bank accounts strictly for her own benefit after the parties had ended their relationship.  In sum, the Court in Deschane found that the facts were nearly the exact opposite of Lewis Estate insofar as the “realities of ownership” were concerned.  Accordingly, the plaintiff could not rely on the Court’s holding in Lewis Estate to support his claim to a share of defendant’s inheritance even though the money passed through the parties’ joint bank account.

Those challenging the presumption of MCL §487.703 must provide reasonably clear and persuasive evidence showing the account creator’s intent upon establishing the joint account arrangement. Relevant evidence to satisfy this burden may come in the form of witness statements such as from bank employees or other individuals present at the time the joint account was created, notes and correspondence from the account creator, or other banking and financial records. More importantly, as recent Court decisions have held the “realities of ownership” play an important factor and often a determining factor on the rights of a joint tenant on a joint account.

Individuals considering challenging a joint account arrangement should consider consulting with an attorney to discuss their options. Depending on the circumstances, challenging, or enforcing a joint account arrangement can be a complex and difficult process and, in such situations, the attorneys at Simon PLC Attorneys & Counselors can provide you with the guidance, advice, and expertise required to properly challenge and/or enforce a joint account arrangement.

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