A parent opens a joint bank account with an adult child. The signature card says the funds are “payable to either or survivor.” When the parent dies, does the child automatically own the money? Or does it belong to the parent’s estate and pass under the parent’s will? The answer depends entirely on the specific language in the written agreement between the account holders.
Texas law eliminated the common law right of survivorship in 1848. Since then, when joint owners die, their interest passes to their heirs rather than automatically to the surviving co-owner. However, joint owners can agree in writing to create a survivorship right. The question becomes: what language is sufficient to create that right? Does “payable to survivor” work? Or must the agreement use more explicit terms?
The case of Stauffer v. Henderson, 801 S.W.2d 858 (Tex. 1990), provides an opportunity to examine how Texas courts interpret joint account agreements. The dispute centered on whether standard bank signature card language created a right of survivorship or merely authorized the bank to pay funds to the surviving account holder.
Facts & Procedural History
Marian opened a joint bank account with her sister Mary. All funds deposited into the account belonged to Marian. The only written agreement between the sisters was the signature card provided by the bank. Both Marian and Mary signed this card.
The signature card stated “JOINT ACCOUNT—PAYABLE TO EITHER OR SURVIVOR.” The agreement provided that all funds deposited “are and shall be our joint property.” It stated that either sister “shall have power to act in all matters relating to such account, whether the other be living or dead.” The card further provided that “upon the death of either of us any balance in said account or any part thereof may be withdrawn by, or upon the order of the survivor.” The agreement added that withdrawal by the survivor “shall be binding upon us and upon our heirs, next of kin, legatees, assigns and personal representatives.” Finally, it authorized the bank to act without further inquiry and stated that any receipt signed by either sister “shall be a valid and sufficient release and discharge” of the bank.
When Marian died, Mary withdrew all the funds from the account. Marian’s husband J.D. was the independent executor of her estate. He sued Mary to recover the funds. J.D. claimed the money was community property belonging half to him individually and half to Marian’s estate. Mary contended she was entitled to the funds by right of survivorship created by the signature card agreement.
In the probate litigation, both sides moved for partial summary judgment based entirely on the language of the signature card. The trial court granted J.D.’s motion and held that Mary was not entitled to the funds. The trial court severed this judgment from remaining issues in the case. Mary appealed. The court of appeals affirmed. The Texas Supreme Court granted review.
How Texas Eliminated the Common Law Right of Survivorship
At common law, the right of survivorship was the grand incident of a joint estate. When property was held jointly, the surviving owner automatically took the deceased owner’s interest. This right of survivorship operated as an essential legal incident of joint ownership.
The right of survivorship has not been favored in America. Most American jurisdictions abolished it. The Second Legislature of Texas did so in 1848 through the following statute: “When two or more persons hold an estate, real, personal or mixed jointly, and one joint tenant dies before severance, his interest in said joint estate shall not survive to the remaining joint tenant or joint tenants, but shall descend to and be vested in the heirs or legal representatives of such deceased joint tenant, in the same manner as if his interest had been severed and ascertained.”
This elimination of the right of survivorship as a necessary element of joint estates did not prohibit joint owners from agreeing that each would take the other’s interest at death. Although the 1848 statute did not expressly allow such agreements, it also did not prevent joint owners from providing among themselves that property should pass to the survivor.
The power of joint owners to agree to a right of survivorship was implicit in the 1848 statute. This power became explicit when the statute was moved to section 46 of the new Probate Code adopted in 1955. The amended provision stated that a joint owner’s interest “shall not survive to the remaining joint owner or joint owners, but shall descend to, and be vested in, the heirs or legal representatives of such deceased joint owner.” However, it added: “Provided, however, that by agreement in writing of joint owners of property, the interest of any joint owner who dies may be made to survive to the surviving joint owner or joint owners, but no such agreement shall be inferred from the mere fact that the property is held in joint ownership.”
Although the language of section 46 has been amended several times since 1955, its essential provisions have continued in effect. Joint ownership does not create survivorship rights. However, joint owners may create such rights through written agreement.
Why Joint Accounts Create Special Problems
It is clear that parties to a joint bank account may make a valid and enforceable written agreement that funds will belong to the survivor. However, considerable confusion existed over the effect of particular agreements.
This confusion stems from the very different reasons people open joint accounts. Sometimes a person deposits funds into an account upon which another person is authorized to draw merely for the depositor’s convenience. The owner of the money intends only to facilitate disbursement for her own purposes. This is part of her own estate plan for administering her estate, not transferring her estate. She does not intend to transfer title to the co-signator.
It is equally common for a depositor to intend that at some point—if not before death, then at death—the funds will become the property of the co-signator. Both common experience and the express language of section 46 prohibit inferring from the mere creation of a joint account that the parties intend ownership to pass automatically upon death.
Frequently, the only written agreement reflecting the parties’ intent is the signature card provided by the depository. The principal purpose of such forms is to authorize the depository to pay funds upon the direction of any party. These forms are not primarily designed to establish ownership of funds as between the parties upon death.
A joint account agreement authorizing funds to be paid to one party allows that party to insist the depository honor a request for payment. However, such authorization does not establish the right of that party to the funds against other claimants. The account agreement provided by the depository ordinarily authorizes delivery of funds to any party but may or may not settle the issue of actual ownership.
Why the Signature Card in This Case Failed to Create Survivorship Rights
The account Marian opened with Mary was a joint account. The only written agreement pertaining to that account was the signature card. The card authorized payment of funds to the survivor at the other party’s death. However, it did not create a right of survivorship.
The distinction matters. Language authorizing a bank to pay funds to a survivor protects the bank from liability. The bank may safely deliver the money to the person standing before it. Such language does not determine who actually owns the funds as between competing claimants.
To create a right of survivorship, the agreement must state that the interest of the deceased party “is made to survive” to the surviving party. The signature card did not contain such language. It stated that funds “may be withdrawn by” the survivor. It provided that such withdrawal “shall be binding upon” the heirs. It authorized the bank to act without further inquiry.
All of this language addressed the bank’s authority and protection. None of it clearly stated that ownership of the funds would vest in the survivor. The card protected the bank from claims by the deceased party’s heirs. It did not establish that the survivor had superior rights to those heirs.
A presumption that survivorship was intended cannot save Mary’s claim. Any such presumption would violate both the parol evidence rule and the express prohibition against inferring survivorship from mere creation of a joint account. Our probate laws requires a written agreement signed by the deceased joint account party. The statute makes such agreement determinative.
The Texas Supreme Court held that no right of survivorship existed. Both courts below correctly held as a matter of law that Mary was not entitled to the funds. The judgment was affirmed.
The Takeaway
The Texas Supreme Court established that joint bank account signature cards must do more than authorize payment to a survivor. To create actual ownership rights in the surviving account holder, the written agreement must clearly state that the deceased party’s interest “is made to survive” to the survivor. Language protecting the bank and authorizing withdrawal does not accomplish this purpose. Changes to the probate code eliminated the confusion of prior case law for this issue, which was clarified by this court case. Families opening joint accounts should understand that unless the written agreement explicitly creates survivorship rights, the deceased owner’s interest will pass through the estate to heirs rather than automatically to the surviving account holder.
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