January 1, 1900

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.