Authority of a Trustee as joint bank account holder.

[Casteno]

Jurisdiction

Michigan

In brief: I am Power of Attorney and named on two joint bank accounts of an elderly lady with dementia. Does my status as joint account holder take precedence over the provisions of her Trust, once she dies, so that I can send some money to her relatives whom I believe were overlooked when she established her Trust beneficiaries?

To go into further detail: this elderly lady (call her Olivia) was in a decades long relationship with my father, who is now deceased. She has a brother in a neighboring state and some distant great-nieces and nephews, but I am her nearest close connection so she made me her Power of Attorney. In 2016 she set up her estate documents, which included the POA and a Revocable Living Trust. The trust is set up such that Olivia is the primary trustee and her friend (call her Marge) is successor trustee. I am the alternate successor trustee.

Olivia's Trust is the sole beneficiary of her investment accounts. The Trust is written so that upon her death, the funds in the Trust are distributed among four named beneficiaries. There are also two joint bank accounts in which Olivia is the principal account owner along with me. A provision of the Trust (called a Comprehensive Transfer Document) states that bank accounts formerly owned by Olivia are now owned by the Trustee. What I am wondering is how and whether this applies to joint accounts, and if I have the ability to act independently once Olivia dies.

In a joint bank account, when one account owner dies the other owner becomes sole owner. When the joint owner is a trustee, however, does that trustee have an obligation to disburse the funds according to the Trust? A further complication is that through an oversight I had neglected to establish a TOD on one of these two accounts. The Trust should have been named as the beneficiary. Does the Comprehensive Transfer Document overrule the TOD? The named joint account owner, according to the bank, is "Olivia". Not the Trust.

It might seem that I am angling to get some money away from the beneficiaries, to my benefit. Actually it would be to her relatives benefit. The fact is that it has always made me uncomfortable that Olivia's brother, great-nieces and nephews were cut out of her will entirely (aside from inheriting some silverware). Having gone through Olivia's documents recently, I found a 20 year-old will which gives half the proceeds of Olivia's house to her brother. This will is, of course, null and void, but I believe that it would still be her intention and that her brother was omitted by oversight. I am about to sell Olivia's house, and would like to find a way to get some money to her relatives.

My thoughts were this: to sell the house and keep the proceeds in the joint bank account. After Olivia dies, the proceeds of her investment accounts would pass to the beneficiaries of the Trust. Once the obligations of the Trust are paid, the Trust is dissolved and the joint bank account falls into my sole possession. I would then write a series of checks to Olivia's relatives. Would this not be feasible since, because of the transfer document, the Trustee (Olivia's friend Marge) would now be joint owner and bound to distribute the funds according to the rules of the Trust? Most importantly, how does this apply to a joint bank account? Does my position as joint owner give me any say over how these funds are distributed?

 

[zddoodah]

I am Power of Attorney and named on two joint bank accounts of an elderly lady with dementia.

You have power of attorney. "Power of attorney" is a document or the authority conferred by such a document.

Does my status as joint account holder take precedence over the provisions of her Trust, once she dies, so that I can send some money to her relatives whom I believe were overlooked when she established her Trust beneficiaries?

Obviously, no one here has read this woman's trust. However, if you are a joint owner of the accounts, then the money will become your property once she dies, and you'll be able to do whatever you like with the money.

There are also two joint bank accounts in which Olivia is the principal account owner along with me.

Is there any real distinction in the bank account agreement between Olivia as "principal account owner" and you?

In a joint bank account, when one account owner dies the other owner becomes sole owner. When the joint owner is a trustee, however, does that trustee have an obligation to disburse the funds according to the Trust?

As an initial matter, it's not clear why things were set up with one person (you) having power of attorney and a different person as successor trustee. It's even more strange given the bank account provision you mentioned in the trust. I can't think of any good reason to set things up in this way -- especially when the accounts are not owned by the trust and the person with POA is a joint owner on the bank accounts. Another layer of strangeness would be if Marge dies before Olivia and you then become trustee.

As you have described the situation, my comment above holds. However, you would be wise to pay an attorney to review all of the documentation and advise you.

 

[Zigner]

To put it in very basic terms: When it's time, do what you want with your money and do what she wants (wanted) with her money.

 

[flyingron]

Power of attorney expires with the old lady. While she's alive you can act for her.

If you are listed as joint account holder, you an do what you want with the money while she is alive or dead.

The trust only applies to things titled to the trust. As trustee, you can only do things with the trust assets consistent with the trust documents.

Assets not held in the trust (or as you as the beneficial owner), go into the estate and get handled based on her will (if any, or the laws of intestate succession). Your position as account holder or trustee has no bearing on these (until the assets get transferred to the trust or one of these accounts).

 

[adjusterjack]

Having gone through Olivia's documents recently, I found a 20 year-old will which gives half the proceeds of Olivia's house to her brother. This will is, of course, null and void,

Not unless the house is owned by the trust.

Don't "think" you know. Look up the deed and see who the owner on the deed is.

If Olivia is the owner on the deed, and there is no subsequent will, then that will could still be good, the house would have to be probated and the proceeds distributed in accordance with the will after estate debts have been paid.

I am about to sell Olivia's house, and would like to find a way to get some money to her relatives.

If the trust is the owner then the house gets sold and the proceeds go into the trust's bank account to be distributed according to the terms of the trust. You don't get to decide who gets trust money.

My thoughts were this: to sell the house and keep the proceeds in the joint bank account.

If Olivia is the owner, the house gets probated. Whoever is nominated in the will as executor has to go to court and get appointed representative of the estate. If the nominee doesn't want to do it, or isn't around anymore, you can apply. There will have to be an estate account into which the sale proceeds get deposited and then the rep of the estate distributes the proceeds in accordance with the will.

If the trust owns the house then the proceeds go into the trust's bank account, not yours and you distribute the funds in accordance with the terms of the trust.

I may be repeating myself here but I want to make sure you get it.

The only money you have personal control over is the money in the joint account that you have with Olivia. That's your money when she dies and you can give it away to whoever you please.

 

[Zigner]

Why do you (OP) feel that your wishes should take precedence over Olivia's wishes?

 

[army judge]

Why do you (OP) feel that your wishes should take precedence over Olivia's wishes?

Excellent question, my friend.

One answer might have evolved because someone believes it is her/his money already.

Frankly, as a joint account holder with access to the funds, he/she is legally correct.


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Excelente pregunta, amigo.

Una respuesta podría haber evolucionado porque alguien cree que ya es su dinero.

Francamente, como titular de una cuenta conjunta con acceso a los fondos, es legalmente correcto.

 

[Casteno]

duplicate posting removed

 

[Casteno]

Is there any real distinction in the bank account agreement between Olivia as "principal account owner" and you?

I am not sure. Interest income is reported on her taxes, not mine, if that is any indication.

As you have described the situation, my comment above holds. However, you would be wise to pay an attorney to review all of the documentation and advise you.

I think that this is a very good idea and I plan to do that. Thank you.

Assets not held in the trust (or as you as the beneficial owner), go into the estate and get handled based on her will

Her will has given all of her assets to the Trustee (Olivia, while alive, then Marge). Does this mean that the Trustee would become joint owner of the bank accounts? What about the one of the two joint accounts for which no TOD is on file?

Not unless the house is owned by the trust.

Don't "think" you know. Look up the deed and see who the owner on the deed is.

If Olivia is the owner on the deed, and there is no subsequent will, then that will could still be good, the house would have to be probated and the proceeds distributed in accordance with the will after estate debts have been paid.

According to the deed, Olivia is the owner of the house.

"The Grantor, Olivia, a single woman, whose address is ADDRESS, hereby conveys and warrants to herself, Olivia, a single woman, whose address is ADDRESS, for her lifetime, without any liability for waste, coupled with an unrestricted power to convey the property during her lifetime, pursuant to Land Title Standards 9.3. as now in effect. This power to convey creates a general inter vivos power of appointment, which includes the power to sell, gift, mortgage, and lease (or otherwise dispose of the property), and to retain the proceeds from the conveyance. If Olivia retains any interest in this property upon her death, the property is conveyed as tenants in common to the following individuals and/or entity at the time of her death: Olivia, as trustee (or successor trustee(s)) of Olivia's Trust"

Since Olivia is still alive I am using POA to sell the house. I have contacted the lawyer who drafted the estate plan, and was told that it is in my authority.

The distribution plan of the trust states that the house will be gifted to Olivia's friend. A will is included in the estate documents which states:

"I give, devise and bequeath all of the rest, residue and remainder of my estate and property, of whatever kind and wherever situated, owned by me at the time of my death to the trustee(s) of the TRUST, to be added to the assets held in trust and administered by its terms, including any amendments made during my lifetime."

This, I gather, would void the previous will which gave half the proceeds of the house to her brother.

Why do you (OP) feel that your wishes should take precedence over Olivia's wishes?

I would like to follow Olivia's wishes. There does not seem to be any estrangement between herself and her brother, and I feel that her brother would be hurt if he did not receive a share of the estate. I can not say why she chose to leave her house to her friend rather than sell it and leave half the proceeds to her brother. Although she did not have a dementia diagnosis when creating this estate plan, knowing her as I have for 40 years, it has always been difficult to get Olivia to understand things relating to money. The friend who was to be gifted the house was also 1/4 beneficiary to her financial estate. That would be a massive windfall for this friend who, unlike her brother, has not to my knowledge visited or spoken with Olivia in many years.

While it is in my power to do so, I feel that it is reasonable to sell the house. It has sat unoccupied for nearly a year and is costing Olivia (I estimate) $7k per year in taxes, insurance and utilities. The sale can be justified in terms of Olivia's best interests. Can I just put the proceeds into that joint bank account which has always been used for her benefit? Would this be considered intentionally circumventing her wishes by cutting her Trust's beneficiaries out of a portion of the estate when she dies? I think that a lot of this depends on the wording of the Trust, so it might be best if I had it reviewed by an attorney. I do not want to put myself in legal jeopardy.

 

[adjusterjack]

Time to go back to that lawyer and ask all those questions.

 

[flyingron]

The will means nothing while the person is alive. Once it's dead, it guides the probate process. Hopefully, it gives the assets to the TRUST not the trustee. Giving to a trustee directly doesn't bind the trustee with any responsibility.

 

[Zigner]

Excellent question, my friend.

One answer might have evolved because someone believes it is her/his money already.

Frankly, as a joint account holder with access to the funds, he/she is legally correct.

I agree WRT the money in the joint account.