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Fore-Warned Is Fore-Armed
by Rosemary A. Sullivan
When Mom or Dad, as a widow or widower, reaches a point in life where a little help is needed from an adult child to
pay bills and tend to financial matters, more often than not, the adult child goes to the parent’s bank and places
their name on the account with Mom or Dad in order to make it easier for the adult child to help the parent with their
finances and pay bills. However, this simple act, done as a matter of convenience for both parties, can often lead to
unexpected consequences for everyone involved.
Under the Pennsylvania Probate Code, a “joint account means an account payable on request to one or more of
two or more parties whether or not mention is made of any right of survivorship.” Thus, placing Junior’s name
on Mom’s account, to help Mom pay her bills, means Junior can make withdrawals from the account at will.
If Junior is not one of the more upstanding members of the community, Junior’s creditors could potentially go
after the funds in Mom’s account.
Beware of Legal Presumptions
Pennsylvania law sets forth a different set of presumptions as to ownership of funds in joint accounts during
the parties’ lifetime, as compared to when one of the parties on the joint account dies. During the lifetime
of all parties on a joint account, the funds in a joint account
belong to the parties in proportion to their individual net contribution to the sum on deposit, unless there
is clear and convincing evidence of a different intent by the parties. So if the joint account with Junior
consists of all of Mom’s savings from her lifetime, but one of Junior’s creditors sees Junior’s name on the
account, the creditor could still potentially go after the account, and Mom would have to prove that all the
funds in the account originated from her.
On the flipside, Mom may have a will that says she wants all of her assets, including her personal
property i.e. bank accounts, to be equally divided among all her children. But if one of the bank
accounts is a joint account with one child’s name on it, who is presumably helping Mom with her finances,
there is a presumption under Pennsylvania law that at Mom’s death the funds in that joint account would go
to such child as the survivor on the account and not be divided with the remaining siblings despite what Mom’s
will says. Unless Junior’s siblings can present clear and convincing evidence that Mom intended something
different at the time she created the joint account, it is presumed that Mom intended to pass the contents of
the joint account to Junior. (Perhaps, she always liked him best!)
Many parents continue to put one adult child’s name on their bank accounts for convenience and even when
advised of the statutory presumption, believe that such child would never keep his fellow siblings from
sharing in the wealth. Unfortunately that is not always the case, and often when the other siblings discover
the situation at the time Mom’s estate is administered, the cost in both dollars and emotion must be
considered if the issue is to be litigated. It should be noted that the banking institution is relieved of
liability in paying the balance of the funds in the joint account to Junior when Junior makes a request for
Mom’s funds after her death. Nevertheless, rather than believe the dark side of human nature always prevails,
some generous siblings would not even think of cutting out their brother and sister when confronted with a
joint bank account containing thousands of dollars which could be exclusively theirs. One solution is to put
the adult child on Mom’s bank account as a power of attorney which would allow them to sign checks and pay
bills for their parent but not have the funds pass to them upon the parent’s death.
What’s In The Box
Another area of unexpected consequences arises in the disposition of bank safety deposit boxes at the death of
an owner/lessee, whether individually or jointly held. It has become a common practice of many banks to entice
customers to open a new account by throwing in the lease of a safety deposit box for the first year
without having a fee charged to the customer. As a result, when the estate of a decedent is administered and
the assets reviewed, a check of bank records where the decedent had his or her accounts can often reveal a
safety deposit box in the decedent’s name that no one knew about. In that safety deposit box, there could be
jewelry, securities, bonds, the decedent’s Will, cemetery deed, insurance policies, titles to vehicles, deeds
to properties and any number of additional items. Moreover, the Pennsylvania Department of Revenue will want
to know the contents of that box so that they can get their fair share of inheritance taxes paid on the value
of the contents.
Under the Pennsylvania Inheritance and Estate Tax Act, entry into a joint lessee’s safety deposit box is
prohibited by anyone other than the decedent’s spouse unless certain specific procedures are followed
after the death of one of the joint lessees. Over the years, the Pennsylvania Department of Revenue has
implemented a number of procedures to facilitate the inventory of safety deposit boxes and eventually
implemented a more user friendly program. Now, after written application to the District Revenue Office,
a lawyer can be authorized as the appointee of the Department to inventory the box with the Personal
Representative and complete the required forms. Prior to opening the box, a Certificate of Authority to
inventory the box is sent to the lawyer by the Department of Revenue with a copy to the bank, and only that
lawyer appointee may complete the inventory and accompanying documents which are forwarded to the Department.
If the safety deposit box is rented by the decedent and a surviving spouse, the spouse may enter the box
after the decedent’s death to retrieve the Will and cemetery deed, but a similar complete list of the
inventory of the box should be made and list the parties present as well as the date the inventory was
made.
Simple Will Search
If the safety deposit box was rented by the decedent with another person other than a spouse, or by the
decedent alone, the box may be opened in the presence of a bank employee, only for the purpose of removing the
Will and cemetery deed. The bank employee must make or cause to be made a record of the documents removed
from the box during the entry. In addition, where the estate heirs do not believe there are any valuable
assets in the box, the bank can be authorized to do a Will search just to see if there is anything in the
box or if it is indeed empty, rather than going to the expense of hiring an attorney to inventory the box.
However, not all banks are willing to do this.
Enter At Your Own Risk
A significant problem arises when the decedent rented the box with a son or daughter or any other person other
than a spouse. Under the Inheritance and Estate Tax Act, the procedures to enter and inventory the box as
outlined above must be followed, that is, the personal representative of the estate should have an attorney
appointed by the Pennsylvania Department of Revenue, who then has the authority to enter the box and complete
the inventory and forms required and forward them to the Department of Revenue. However, often after the
death of a parent, a joint lessee of the box with the decedent, more often than not, an adult child unaware
of the Tax Act’s requirements and procedures, goes to the bank, enters the box, and removes the contents of
the box. The bank employees, being unaware of the death of the co-lessee because the adult child never
informs the bank employee, allows the entry because the adult child or other joint lessee is a co-lessee of
the safety deposit box and entitled to entry. The co-lessee then removes the contents of the box and may even terminate the lease on the box. Now the bad news. Where a co-lessee enters a safety deposit box after the death of decedent co-lessee, without following the Tax Act’s procedures as outlined above, the entering party, whether an adult child or whoever the co-lessee may be (other than a spouse of decedent), will be guilty of a misdemeanor of the third degree.
The penalty for such a misdemeanor is a term of imprisonment of not more than one year. If the bank
employee, who permitted entry by a co-lessee, had knowledge of the other co-lessee decedent’s death
and permitted entry by the joint lessee in violation of the provisions of the Act, they too are also subject
to the penalty.
Needless to say, the penalty for entering a safety deposit box of a deceased parent with whom an adult child
was a joint lessee on the box without following the Inheritance and Estate Tax Act procedures, gives rise to
truly unexpected consequences—like jail! The only defense is lack of actual knowledge of the death of the
joint colessee (this may be hard for an adult child to argue). In addition, the Department of Revenue does not
have to prove that tax evasion was the motive for unauthorized entry. Just the improper entry in and of
itself is the offense and subject to the penalty.
Having experienced a client who never advised the writer of the existence of the safety deposit box even when
asked and who only discovered after the fact that the client entered the box in violation of the Act’s
procedures, I offer this as a cautionary tale. The Department of Revenue, like any taxing authority, does
not look kindly upon blatant though innocent violations of their procedures. And as always, ignorance is no
defense.
Rosemary A. Sullivan is partner-in-charge of
the Trusts & Estates Practice Group of Hill Wallack LLP in the Langhorne, Pennsylvania Office.
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