Some folk think “estate planning” is putting their children on their bank accounts.  However, this may not be enough if the client later becomes incapacitated.  If the client does not have a comprehensive durable power of attorney (and in some cases, a trust), a court-supervised conservatorship may become necessary.  A recent Mississippi court case* addressed some fundamental issues regarding conservatorship and joint bank accounts.
Issue 1:  Why a Conservatorship?
From 1975 to 1999, Charlie Addison made his daughter, Cynthia Addison Jackson, a joint owner of several of his bank accounts and CDs. In 2011, Charlie’s mental and physical health had declined, and he needed a conservator.  The chancellor appointed Cynthia conservator of Charlie’s person and appointed the Pike County Chancery Clerk conservator of Charlie’s estate.
Point 1:  A conservatorship is a court-supervised “guardianship” for a person who cannot manage his own personal or financial affairs.  Charlie could have named Cynthia to be his conservator in a power of attorney, but he had not executed a power of attorney.  (Some banks will not honor a power of attorney, in which case a living trust would be a better planning tool.)  Where there is no such designation, a petition must be filed by someone who is willing to be the conservator.  If that person is unsuitable or has a conflict of interest with the incapacitated person, the Chancery Court judge may appoint the Chancery Clerk as default conservator by statute in Mississippi.
Issue 2:  What happens to joint accounts at death of the incapacitated person?
The chancellor also ordered the funds in the joint accounts and CDs to be transferred to a conservatorship account for “safekeeping.” Cynthia appealed, contending that she should be able to continue to administer the jointly-owned accounts.  Charlie passed away while the appeal was pending. After Charlie’s death, the court dismissed the conservatorship and Cynthia filed a motion requesting the return of the funds that had been transferred to the conservatorship account. Willie and Aubrey (Charlie’s sons) also appealed.  Cynthia argued that the funds in the conservatorship accounts and CDs should have reverted to her after Charlie’s death because the funds originated in accounts that she and Charlie owned jointly.  Willie and Aubrey argued that the transfer of the funds terminated the joint tenancy and Cynthia’s interest in the funds and that those funds should pass to them as his heirs.
The certificates and signature cards for the jointly owned CDs and bank accounts all specifically designated the owners as Charlie “or” Cynthia.  In addition, the terms and conditions for the three Trustmark CDs specifically stated that use of the conjunction “or” meant that the CD was payable to either Charlie or Cynthia or to the survivor of them. The First Bank CD similarly provided that it would be owned by Charlie and Cynthia “as joint tenants with rights of survivorship” and could be redeemed by “either of the joint tenants or the survivor.” Even absent such express statements of survivorship rights, Mississippi law presumes that a jointly owned account or CD payable to any of the joint owners is intended to confer full rights of survivorship on the joint owners.
Point 2:  The assets owned by an incapacitated person under a conservatorship will pass through his or her probate estate, to heirs or to the beneficiaries of a will that person may have executed.  Joint bank accounts will pass automatically to the surviving joint owner(s) without going through probate of a will or inheritance estate.
The court found that Cynthia’s father had consistently named her as a joint owner on at least six different accounts or CDs for a period covering more than three decades. Thus, at the time the chancery court appointed a conservator for Charlie’s estate, Cynthia was a joint owner of the above-discussed CDs and accounts with her father with rights of survivorship. It was appropriate for funds in the joint accounts to be drawn and used for Charlie’s care and necessary living expenses during his lifetime. However, most of the funds in the joint accounts and deposits remained unused at the time of Charlie’s death. It would not have been proper for the conservator to take any action that would have had the effect of destroying Cynthia’s survivorship interest in those funds.
Courts in other states have held that a conservator’s withdrawal of funds from a joint account does not, in and of itself, destroy the rights of other joint owners. In this case, the court ordered the Chancery Clerk to transfer the funds to “the conservatorship account” for “safekeeping.”  This transfer for “safekeeping” did not destroy Cynthia’s survivorship interest in the funds.  Under Mississippi law, the right to make a complete withdrawal of the funds is a purely elective right of the ward that can be exercised only by the ward, not the conservator.
Issue 3: Was there “undue influence” that should punish Cynthia?
Willie and Aubrey argued that Cynthia’s ownership of the joint accounts should be disregarded because she supposedly exerted “undue influence” over Charlie to have him name her as joint owner. However, they presented no evidence that the joint accounts or CDs were the product of undue influence or that there was a “confidential relationship” between Cynthia and Charlie at the time those accounts and CDs were established.  Under Mississippi law, a parent/child relationship is not necessarily a confidential relationship, and Charlie did not become dependent on Cynthia until years after the accounts at issue were created. Because there was no confidential relationship when the joint accounts were created, there was no presumption of undue influence for Cynthia to rebut.
Point 3:  Undue Influence can invalidate a transfer of ownership.  Mississippi cases have held that when a person is dependent on a family member for access to medical care, handling of financial matters and other needs, such dependence may create a “confidential relationship” between them.  When property or money is transferred from the dependent person to the assisting family member in a confidential relationship, there is a presumption that the transfer was the result of “undue influence” by the family member and may, therefore, be overturned.
* JACKSON v. TOUCHSTONE, NO. 2016-CA-00668-COA
https://courts.ms.gov/Images/Opinions/CO126554.pdf  
In order to give ownership and control of assets and financial affairs to those you want, and avoid later court fights over those matters, call us today to discuss asset protection planning that will carry out your wishes.