I. INDIVIDUAL
Funds deposited are owned by a single person who has the right to deposit and withdraw money. There is only one signer on the signature card. If a minor or person under legal guardianship opens such an account, the bank should take the precaution to have an authorization documented by the parent or guardian.
II. MULTIPLE PARTY
Funds deposited may be owned by two or more persons, either jointly or in common, with or without a right of survivorship. There may be several combinations of who has the right to deposit and withdraw funds, depending upon the relationship established by the signature card, contract, or other documentation. The law of joint accounts regarding creditor’s rights against such accounts, ownership interests, claims, and liability in general may be divided into two areas (common and statutory laws).
A. Common Law
The evolving common law has certain well-established rules regarding joint ownership interest in property. A summary of generally recognized joint property rules follows, however, two points should be kept in mind:
Tenancy in Common. This form of joint ownership, recognized by common law, allows each joint tenant to have a specific but undivided interest in the property (e.g., 30%, 40%, 20% and 10). Each tenant in common has an equal right to the property but there is no survivorship feature (ownership is not transferable to the remaining parties at death, but passes to the tenant’s heirs). Each signer has access to account funds. Depending upon the signature card agreement or contract, the surviving tenants may or may not have access to the account, upon death of a tenant. Regardless, the surviving tenants may be held liable for accessing the account beyond their own interests. Joint Tenancy. This type of ownership, also recognized by common law, involves two or more signers on the account whose intention is to have an equal interest in the property with such interest automatically passing to the surviving joint tenant or tenants upon another joint tenant’s death. At one time, the common law presumed that when the intent of the parties was unclear, a joint tenancy was presumed. But in many states, the presumption of a joint tenancy was reversed by statute and ambiguities began to develop. Lack of clarity in intent and problems of ambiguity prompted many states, including Nebraska, to adopt the Multiple-Person Accounts statutes of the Uniform Probate Code.
B. Statutory Law
The Uniform Probate Code has a Multiple-Person Accounts Article which was adopted in Nebraska in 1993 and is codified in §§ 30-2715 through 30-2733 of the Nebraska Revised Statutes. The law attempts to bring clarity with a number of presumptions applicable to multiple person accounts, unless the parties give evidence of a contrary intent. These provisions are most relevant to controversies between persons. This law does not apply to (i) an account established for a partnership, joint venture, or other organization for a business purpose, (ii) an account controlled by one or more persons as an agent or trustee for a corporation, unincorporated association, or charitable or civic organization, or (iii) a fiduciary or trust account in which the relationship is established other than by the terms of the account (See, § 30-2717). As may be seen from examination of (6) below (Bank Protections), the bank-depositor relationship is also not altered by these provisions. Here are some major features of the multiple-person accounts law:
1. Definitions (§ 30-2716)
a. Account A contract of deposit between a depositor and a financial institution, and includes a checking account, savings account, certificate of deposit, and share account.
b. Agent A person authorized to make account transactions for a party.
c. Beneficiary A person named as one to whom sums on deposit in an account are payable on request after death of all parties or for whom a party is named as trustee.
d. Financial Institution An organization authorized to do business under state or federal laws relating to financial institutions, and includes a bank, trust company, savings bank, building and loan association, savings and loan company or association, and credit union.
e. Multiple-Party Account An account payable on request to one or more of two or more parties, whether or not a right of survivorship is mentioned.
f. Party A person who, by the terms of an account, has a present right, subject to request, to payment from the account other than as a beneficiary or agent.
g. Payment of Sums on Deposit Includes withdrawal, payment to a party or third person pursuant to check or other request, and a pledge of sums on deposit by a party, or a setoff, reduction, or other deposition of all or part of an account pursuant to a pledge.
h. POD Designation The designation of (i) a beneficiary in an account payable on request to one party during the party’s lifetime and on the party’s death to one or more beneficiaries, or to one or more parties during their lifetimes and on death of all of them to one or more beneficiaries, or (ii) a beneficiary in an account in the name of one or more parties as trustee for one or more beneficiaries if the relationship is established by the terms of the account and there is no subject of the trust other than the sums on deposit in the account, whether or not payment to the beneficiary is mentioned.
i. Receive As it relates to notice to a financial institution, means receipt in the office or branch office of the financial institution in which the account is established, but if the terms of the account require notice at a particular place, in the place required.
j. Request A request for payment complying with all terms of the account, including special requirements concerning necessary signatures and regulations of the financial institution; but if terms of the account condition payment on advance notice, a request for payment is treated as immediately effective and a notice of intent to withdraw is treated as a request for payment.
k. Sums on Deposit The balance payable on an account, including interest and dividends earned, whether or not included in the current balance, and any deposit life insurance proceeds added to the account by reason of death of a party.
l. Term of the Account Include the deposit agreement and other terms and conditions, including the form, of the contract of deposit.
2. Limitation on Scope of Sections (§ 30-2717)
Sections 30-2716 through 30-2733 do not apply to (a) an account established for a partnership, joint venture, or other organization for a business purpose, (b) an account controlled by one or more persons as an agent or trustee for a corporation, unincorporated association, or charitable or civic organization, or (c) a fiduciary or trust account in which the relationship is established other than by the terms of the account.
3. Types of Accounts (§ 30-2718)
An account may be for a single party or multiple parties. A multiple-party account may be with or without a right of survivorship between the parties. Either a single-party account or a multiple-party account may have a POD designation, an agency designation, or both, except that a POD designation in a multiple-party account without right of survivorship is ineffective.
4. Forms (§ 30-2719)
A contract of deposit that contains provisions in substantially the form provided in § 30-2719 establishes the type of account provided, and the account is governed by the provisions of §§ 30-2716 to 30-2733 applicable to an account of that type.
A contract of deposit that does not contain provisions in substantially the form described above is governed by the provisions of §§ 30-2716 to 30-2733 applicable to the type of account that most nearly conforms to the depositor’s intent.
UNIFORM SINGLE- OR MULTIPLE-PARTY ACCOUNT FORM
PARTIES (Name One Or More Parties):
__________________ __________________
OWNERSHIP (Select One And Initial):
__ SINGLE-PARTY ACCOUNT
__ MULTIPLE-PARTY ACCOUNT
Parties own account in proportion to net contributions unless there is clear and convincing evidence of a different intent.
RIGHTS AT DEATH (Select One And Initial)
At death of party, ownership passes as part of party’s estate.
__ SINGLE-PARTY ACCOUNT WITH POD (PAY ON DEATH) DESIGNATION
(Name One Or More Beneficiaries):
At death of party, ownership passes to POD beneficiaries and is not part of party’s estate.
__ MULTIPLE-PARTY ACCOUNT WITH RIGHT OF SURVIVORSHIP
At death of party, ownership passes to surviving parties.
__ MULTIPLE-PARTY ACCOUNT WITH RIGHT OF SURVIVORSHIP AND POD (PAY ON DEATH) DESIGNATION
At death of last surviving party, ownership passes to POD beneficiaries and is not part of last surviving party’s estate.
__ MULTIPLE-PARTY ACCOUNT WITHOUT RIGHT OF SURVIVORSHIP
At death of party, deceased party’s ownership passes as part of deceased party’s estate.
AGENCY (POWER OF ATTORNEY) DESIGNATION (Optional)
Agents may make account transactions for parties but have no ownership or rights at death unless named as POD beneficiaries.
(To Add Agency Designation To Account, Name One Or More Agents):
(Select One And Initial):
__ AGENCY DESIGNATION SURVIVES DISABILITY OR INCAPACITY OF PARTIES
__ AGENCY DESIGNATION TERMINATES ON DISABILITY OR INCAPACITY OF PARTIES
5. Designation of Agent (§ 30-2720)
The parties to an account may designate a person other than a party to serve as agent for all parties. Such an agent is authorized to make account transactions on the account and all parties must agree in writing to the designation of an agent. The authority of the agent terminates when the sole party or last surviving party of an account dies. While the agent is authorized to make account transactions for the parties, he or she has no ownership or rights in the account unless the terms of the agency designation provide that the authority of the agent terminates on disability or incapacity of a party, the agent’s authority survives disability and incapacity. Designation of an agent is approximately equivalent to providing an authorized signer on an account.
6. Ownership Rights During Lifetime (§ 30-2722)
a. During the lifetime of all parties, an account belongs to the parties in proportion to the net contribution of each to the sums on deposit, unless there is a clear and convincing evidence of a different intent. As between parties married to each other, in the absence of proof otherwise, the net contribution of each is presumed to be an equal amount.
b. A beneficiary in an account having a POD designation has no right to sums on deposit during the life time of any party.
c. An agent in an account with an agency designation has no beneficial right to sums on deposit.
NOTE: For purposes of this section “net contribution of a party” means the sum of all deposits to an account made by or for the party, less all payments from the account made to or for the party which have not been paid to or applied to the use of another party and a proportionate share of any charges deducted from the account, plus a proportionate share of any interest or dividends earned, whether or not included in the current balance. The term includes deposit life insurance proceeds added to the account by reason of death of the party whose net contribution is in question.
7. Ownership Rights at Death (§§ 30-2723 through 2726)
a. On death of a party sums on deposit in a multiple-party account belong to the surviving party or parties. If two or more parties survive and one is the surviving spouse of the decedent, the amount to which the descendent, immediately before death, was beneficially entitled belongs to the surviving spouse. If two or more parties survive and none is the surviving spouse of the descendent, the amount to which the descendent, immediately before death, was beneficially entitled under such section belongs to the surviving parties in equal shares, and augments the proportion to which each survivor, immediately before the decedent’s death, was beneficially entitled, and the right of survivorship continues between the surviving parties.
b. In an account with a POD designation:
(1) On death of one of two or more parties, the rights in sums on deposit are governed by (a) above.
(2) On death of the sole party or the last survivor of two or more parties, sums on deposit belong to the surviving beneficiary or beneficiaries. If two or more beneficiaries survive, sums on deposit belong to them in equal and undivided shares, and there is no right of survivorship in the event of death of a beneficiary thereafter. If no beneficiary survives, sums on deposit belong to the estate of the last surviving party.
(3) Sums on deposit in a single-party account without a POD designation, or in a multiple-party account that, by the terms of the account, is without right of survivorship, are not affected by death of a party, but the amount to which the descendent, immediately before death, was beneficially entitled is transferred as part of the decedent’s estate. A POD designation in a multiple-party account without right of survivorship is ineffective. For purposes of this section, designation of an account as a tenancy in common establishes that the account is without right of survivorship.
(4) The ownership right of a surviving party or beneficiary, or of the decedent’s estate, in sums on deposit is subject to requests for payment made by a party before that party’s death, whether paid by the financial institution before or after death, or unpaid. The surviving party or beneficiary, or the decedent’s estate, is liable to the payee of an unpaid request for payment. The liability is limited to a proportionate share of the amount transferred under this section, to the extent necessary to discharge the request for payment.
8. Alteration of Rights (§ 30-2724)
a. Rights at death under (c) above are determined by the type of account at the death of a party. The type of account may be altered by written notice given by a party to the financial institution to change the type of account or to stop or vary payment under the terms of the account. The notice must be signed by a party and received by the financial institution during the party’s lifetime.
b. A right of survivorship arising from the express terms of the account, (c) above, or a POD designation, may not be altered by will.
9. Rights of Creditors and Others (§ 30-2726)
a. If other assets of the estate are insufficient, a transfer resulting from a right of survivorship or POD designation is not effective against the estate of a deceased party to the extent needed to pay claims against the estate, statutory allowances to the surviving spouse and children, taxes, and expenses of administration.
b. A surviving party or beneficiary who receives payment from an account after death of a party is liable to account to the personal representative of the decedent for a proportionate share of the amount received to which the decedent, immediately before death, was beneficially entitled to the extent necessary to discharge the amounts described in (a) above remaining unpaid after application of the decedent’s estate. A proceeding to assert the liability for claims against the estate and statutory allowances may not be commenced unless the personal representative has received a written demand by the surviving spouse, a creditor, a child, or a person acting for a child of the decedent. The proceeding must be commenced within one year after death of the decedent.
c. A surviving party or beneficiary against whom a proceeding to account is brought may join as a party to the proceeding a surviving party or beneficiary of any other account of the decedent or a surviving owner or beneficiary any securities or securities account of the decedent or proceeds thereof.
d. Sums recovered by the personal representative must be administered as part of the decedent’s estate. This section does not affect the protection from claims of the personal representative or estate of a deceased party for a financial institution that makes payment in accordance with the terms of the account.
10. Bank Protections (§§ 30-2727 through 30-2733)
a. Authority of Financial Institution (§ 30-2728) A financial institution may enter into a contract of deposit for a multiple-party account to the same extent it may enter into a contract of deposit for a single-party account, and may provide for a POD designation and an agency designation in either a single-party account or a multiple-party account. A financial institution need not inquire as to the source of a deposit to an account or as to the proposed application of a payment from an account.
b. Payment on Multiple-Party Account (§ 30-2728) A financial institution, on request, may pay sums on deposit in a multiple-party account to:
(1) one or more of the parties, whether or not another party is disabled, incapacitated, or deceased when payment is requested and whether or not the party making the request survives another party; or
(2) the personal representative, if any, or, if there is none, the heirs or devisees of a deceased party in proof of death is presented to the financial institution showing that the deceased party was the survivor of all other persons named on the account either as a party or beneficiary, unless the account is without right of survivorship.
c. Payment on POD Designation (§ 30-2729) A financial institution, on request, may pay sums on deposit in an account with a POD designation to:
(1) one or more of the parties, whether or not another party is disabled, incapacitated, or deceased when the payment is requested and whether or not a party survives another party;
(2) the beneficiary or beneficiaries, if proof of death is presented to the financial institution showing that the beneficiary or beneficiaries survived all persons named as parties; or
(3) the personal representative, if any, or, if there is none, the heirs or devisees of a deceased party, if proof of death is presented to the financial institution showing that the deceased party was the survivor of all other persons named on the account either as a party or beneficiary.
d. Payment to Designated Agent (§ 30-2730) A financial institution, on request of an agent under an agency designation for an account, may pay to the agent sums on deposit in the account, whether or not a party is disabled, incapacitated, or deceased when the request is made or received, and whether or not the authority of the agent terminates on the disability or incapacity of a party.
e. Payment to Minor (§ 30-2731) If a financial institution is required or permitted to make payment to a minor designated as a beneficiary, payment may be made pursuant to the Nebraska Uniform Transfers to Minors Act or pursuant to any other laws of this state.
f. Discharge (§ 30-2732)
(1) Payment made in accordance with the type of account discharges the financial institution from all claims for amounts so paid, whether or not the payment is consistent with the beneficial ownership of the account as between parties, beneficiaries, or their successors. Payment may be made whether or not a party, beneficiary, or agent is disabled, incapacitated, or deceased when payment is requested, received, or made.
(2) Protection under this section does not extend to payments made after a financial institution has received written notice from a party, or from the personal representative, surviving spouse, or heir or devisee of a deceased party, to the effect that payments in accordance with the terms of the account, including one having an agency designation, should not be permitted, and the financial institution has had a reasonable opportunity to act on it when payment is made. Unless the notice is withdrawn by the person giving it, the successor of any deceased party must concur in a request for payment if the financial institution is to be protected under this section. Unless a financial institution has been served with process in an action or proceeding, no other notice or other information shown to have been available to the financial institution affects its right to protection under this section.
(3) A financial institution that receives written notice pursuant to this section or otherwise has reason to believe that a dispute exists as to the rights of the parties may refuse, without liability, to make payments in accordance with the terms of the account.
(4) Protection of a financial institution under this section does not affect the rights of parties in disputes between themselves or their successors concerning the beneficial ownership of sums on deposit in accounts or payments made from account.
g. Setoff (§ 30-2733) Without qualifying any other statutory right to setoff or lien and subject to any contractual provision, if a party is indebted to a financial institution, the financial institution has a right to setoff against the account. The amount of the account subject to setoff is the proportion to which the party is, or immediately before death was, beneficially entitled or, in the absence of proof of that proportion, an equal share with all parties.
C. Common Joint Account Questions and Answers
1. Is one joint depositor liable for overdrafts created in the account by checks drawn by the other joint depositor?
Example: Checks payable to husband are endorsed and deposited in a joint account shared with wife. Wife has no involvement with checks and does not write her own checks on proceeds.
Discussion: Wife still considered “customer” but would only be liable if she did not sign any of the checks and did not benefit from the proceeds of any of the checks (See, U.C.C. § 4-401(b)). This liability limitation may be varied by agreement.
(See, U.C.C. § 4-103(a)). Thus, your deposit agreement must clearly state that each joint depositor is personally liable for overdrafts created by the other.
2. May one joint depositor terminate the interest of another?
Example: Your customer has requested removal of his wife’s name from their joint account. It seems that they are in the process of separating. He claims that the funds are his and does not want her to have access to them.
Discussion: One depositor cannot unilaterally terminate the interest of another depositor in a joint account, however, either party to a typical joint account has the right to withdraw all funds in the account. Either party may exercise ownership rights over the funds in the account.
Although the husband cannot legally terminate his wife’s ownership interest in their joint account, he may withdraw the funds and deposit them into another account held solely in his name. Alternatively, U.C.C. § 4-403(a) allows a customer or any person authorized to draw on an account to close the account by an order to the bank. It seems pro forma to require a two-step process achieving the same result; however, it helps to think of this not in terms of the result being achieved but rather in terms of the authority being exercised.
D. Power of Attorney
On occasion, a customer may wish to allow for another person or persons to make transactions on an account with the bank, but does not wish for such third parties to be a co-owner of the account (as would be the case of joint accounts). The use of a “power of attorney” may satisfy the wishes of the customer in such cases.
A power of attorney signature card or other appropriate document must be executed to establish the “power of attorney” or “attorney-in-fact” relationship. This is a separate contract from the signature card contract which first established the account relationship. The account owners may, at any time and without the consent of the “attorney-in-fact”, revoke this special relationship in writing. The “power of attorney” authority automatically terminates upon the death of the account owner and the bank has “knowledge” of the event.