Who Inherits a Joint Bank Account in Texas

It is common for a parent to create a joint bank account with the intent that someone accesses the account to pay for their funeral or last expenses. Who owns this account once the parent dies?

What about other bank accounts that are held jointly? Does the joint owner, surviving spouse or someone else inherit the funds in the account?

Those who do not hire an attorney to help plan their estates may be surprised by the outcome.

These questions have been litigated quite a bit. The Stauffer v. Henderson, 801 S.W.2d 858 (Tex. 1990) case is the leading case on point. It provides the answers to these questions.

Facts & Procedural History

In this case, the decedent opened a joint bank account with her sister (who we’ll refer to as the defendant) and both signed an account signature card.

The account signature card stipulated that all funds in the account were joint property and upon the death of either party, the survivor could withdraw the funds.

When the decedent passed, her sister withdrew the funds. The decedent’s husband (who we’ll call the plaintiff) filed a dispute in probate court against the sister.

The plaintiff sought to recover the funds, claiming that the funds were community property, to which he was entitled to half. 

The defendant-sister contended she was entitled to the funds by right of survivorship pursuant to the written agreement of the joint account.

Right of Survivorship

The term “right of survivorship” refers to a contractual right to property. It comes from property that is designated or titled as “joint tenant” property with rights of survivorship. This property passes automatically to the surviving named joint account owner on the death of the other owner.

This differs from property held as “tenants in common.” Property held as tenants in common passes to the decedent’s heirs under Texas law if there is no Will or according to his or her Will.

Joint tenant with the right of survivorship has not been favored in the United States and has been slowly abolished in most jurisdictions.

Texas is one of those jurisdictions. In 1848, a Texas statute effectively eliminated the right of survivorship arising from joint ownership. The statute read that when two or more persons held property jointly and one party dies before severance of that property, the decedent’s interest in the joint estate shall not survive to the remaining parties but shall descend to the decedent’s heirs and legal representatives as if the decedent’s interest had been severed. 

This changed in 1955. The Texas legislature amended the statute. The amendment explicitly allowed joint owners to agree to a right of survivorship. However, the amendment specified that no such agreement was to be inferred from the mere fact that the property is held in joint ownership in the first instance. The decedent must explicitly sign an agreement to establish transfer of ownership upon death.

Explanation of the Statute

This brings us back to this case. The court addressed the amended statute. It did so by considering why joint accounts are often set up.

The court noted that a person may deposit funds into a joint account merely for their own convenience of facilitating disbursement, not to transfer title to the other person. According to the court, the mere existence of this type of “convenience account” is insufficient to infer that the parties intended for the transfer of ownership upon death. There needs to be additional evidence of intent.

In the present case, the joint account agreement provided authorization of the delivery of funds to joint parties, but it did not settle the issue of actual ownership. The decedent opened a joint account with her sister. The only written agreement is the account signature card authorizing payment of funds to the survivor at the time of death but did not create a right of survivorship as it did not include any language mentioning the transfer on death. Thus, the court held that the sister was not entitled to the funds in the account.

The Takeaway

This case shows that the mere existence of a joint account does not mean that the surviving joint owner is entitled to the funds on death.

Explicit evidence, such as a signed bank signature card for a bank account, is required to establish the intent of the decedent to create a right of survivorship.

Those who share a “convenience account” may not realize that the survivor is not entitled to the funds on death. This is one of the common errors personal representatives make when probating estates. They often fail to realize that the joint owner cannot keep the funds held in convenience accounts. These are probate assets that have to be distributed as part of the probate administration.