A common question on most financial/investment account applications is whether an account-holder desires to own the account with one or more persons, with or without survivorship. Owning an account with “survivorship” means that upon the passing of one account-holder, the entirety of the funds will pass to the surviving account-holder (regardless of what the departed account-holder’s will or trust provides).

A common question that we encounter is what happens when a will’s language is inconsistent with the titling of an account held with survivorship?

The short answer is that the survivorship titling of the account will typically control over a will’s language.

This is because account titling usually supersedes a person’s wishes in her trust and/or will. When accounts are held with survivorship, they are administered outside of a person’s probate estate. Accordingly, the funds in such accounts pass to the co-owner regardless of what a will says and without any judicial oversight. As a result, the failure to properly handle the titling of such accounts can have a profound (and surprising) impact on a person’s estate plan.

Why do survivorship accounts control over wills and trusts? Virginia Code Section 6.2-608(E) provides: “[a] right of survivorship arising from the express terms of the account or under this section, a beneficiary designation in a trust account, or a P.O.D. payee designation, cannot be changed by will.” The reason for this distinction is that banking and financial accounts are typically governed by state contract law. These accounts are generally considered to be contracts entered into between the depositor/investor and the financial institution. As a result, the disposition of funds deposited in an account is governed by the agreement between the depositor and the financial institution. When a person passes away, accordingly, the property passes pursuant to the account agreement, and, in most cases, the applicable survivorship titling. In short, when such property is governed by a valid survivorship tiling, there are no assets that pass to the estate.

Is there any recourse for a beneficiary of a trust or estate to challenge the titling of a survivorship account?

There are several legal bases by which to challenge survivorship account titling. Such bases include, but are not limited to, undue influence, lack of capacity, fraud, and the lesser-known “account of convenience” doctrine. This post will seek to provide the basic background on the “account of convenience doctrine.

Virginia Code Section 6.2-608(A) provides that “[s]ums remaining on deposit at the death of a party to a joint account belong to the surviving party as against the estate of the decedent unless there is clear and convincing evidence of a different intention at the time the account is created.” This provision provides a basis for interested persons to sue to set aside the beneficiary designations/survivorship titling of accounts if it can be shown that (i) such accounts were merely “accounts of convenience”, and (ii) that such changes were not intended to pass the entirety of the funds to the co-owner.

Typically, the legal inquiry involves whether the co-owner was added to the account merely for the convenience of the original owner. This can be shown through an intent that the co-owner would assist the original owner with bill-paying or banking. Factors that are relevant to this inquiry include the health, disability, or illness of the depositor, the relationship between the beneficiary and depositor, and the circumstances around which the account was used. If a person can show that this account was merely an “account of convenience”, Virginia circuit courts are empowered to set aside the survivorship aspect of the account or the beneficiary designation. If successful, the accounts would then pass according to the person’s will or Virginia’s intestacy scheme.