Pennsylvania Fiduciary Litigation : Pennsylvania Trusts and Estates Lawyer & Expert Witness : Patti Spencer Law Firm : Fiduciary Litigation, Planning : Lancaster, Harrisburg, Philadelphia, Pennsylvania

See our prior blog post on the issue of whether an inconsistent will can overcome the presumption that a joint account passes to the surviving joint owner.  (You may be surprised at what the Superior Court said.)

The Pennsylvania Supreme Court has granted the petition for Allowance of Appeal from the Order of the Superior Court in the Estate of Alice Novosielski.  The saga conitnues.  See the Order here.

In Novosielski, the executor of the decedent's estate, who was also the decedent's attorney-in-fact. took ownership of a joint account as the surviving joint owner.  In September 2000, the decedent signed a will leaving the executor approximately 10% of her estate.  Four days after the codicil was executed, the decedent signed a Treasury bill, bond, note tender prepared by the executor which created a joint interest in a treasury account between the decedent and the executor.

If the executor was the owner of the joint account, he would have received approximately 4/5 of the decedent's total estate.  The court found that there was clear and convincing evidence that the decedent did not want the executor to be the owner of the joint account, because of her mental state, the short time that had elapsed since the execution of the codicil, and the "vast difference" between what the executor would have received under the codicil and from the joint account. 

A similar result in In Re Piet makes us estate planners feel like the earth is shifting under our feet.

Here are the issues to be briefed in the Novieliski appeal:"

(1) By applying state law to override federal  treasury regulations, is the Superior Court's  award of the joint treasury account to the decedent's estate precluded by the Supremacy Clause of the United States Constitution?

(2) Did the Superior Court err in holding that  the presumption of survivorship under   20 Pa.C.S.A. § 6304(a) is defeated, per se, if the joint account results in an allocation of the estate that is  inconsistent with an existing  will?

(3) Did the Superior Court err in determining,   under 20 Pa.C.S.A. § 6304(a), that there was  clear and convincing evidence of a different  intent at the time the account was created?

(4) Did the Superior Court err in failing to accord the factual findings of the master the same weight and effect as a jury verdict?

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In a decision filed April 17, 2008, the Pennsylvania Superior Court turned what we know about wills and joint property on its head.  In In re Estate of Amelia J. Piet, the court ruled that joint accounts did not pass to the surviving joint owner because the accounts were made joint after the execution of a will that would have provided a different disposition.

The concept of a 'convenience account' has long been part of the law of the Commonwealth.  20 Pa.C.S.A. §6304 of the Multiple Party Accounts Act provides:

"(a) Joint Account. - Any sum remaining on deposit at the death of a party to a joint account belongs to the surviving party or parties as against the estate of the decedent unless there is clear and convincing evidence of a different intent at the time the account is created."

The Allegheny County Orphan's Court, after hearing, found that for the accounts in question, there was no evidence to overcome the statute's presumption and that the accounts passed to the surviving joint owner.

The Superior Court said they would not "blindly adhere" to the section 6304(a) ownership presumption, because  the testamentary intent of the testator would be frustrated.    (In other words, they are  not going to follow the statute.)  The court held that the previously executed will "trumps" the joint registration of the bank accounts.   Have you ever heard of anything like that?

The court cited In re Estate of Novosielski (a troubling case in its own right - see an excellent discussion of Novosielski and of the Piet case by Attorney Thomas K. Johnson II in Dechert LLP's newsletter) to support its holding even though that case can be readily distinguished on its facts as pointed out in the dissenting opinion.

In a lone dissent, Judge Maureen Lally-Green says "It has been the law for centuries in the Commonwealth that regardless of what is devised in a will and to whom it is devised, a testator can gift away any or all assets during his or her lifetime as long as donative intent and delivery are present.  The gifting can occur in many forms from an outright inter vivos gift to a gift that occurs in a joint tenancy with rights of survivorship by the death of one joint tenant and the passing of the gift to the survivor.  All such gifts take effect outside of the estate that passes by will."

Further:  "I do not believe that the creation of a joint account with a right of survivorship alters the testamentary scheme.  Rather, such an account alters the amount of the estate,  The execution of a will does not prevent the testator from subsequently altering the amount in the estate as he or she sees fit. such as by the creation of a joint account or through inter vivos gifting."

What do we do now?

Does this mean that whenever we administer an estate we must determine when joint property is created and if it is after the last Will, we must seek to recover it for the estate?  Does the same thing apply to beneficiary designations? 

Here is the advice of Attorney Thomas K. Johnson II: 

"It seems likely that the Pennsylvania Supreme Court or the Legislature will have to address this issue in the near future.  For now, however, attorneys, financial institutions and joint account holders need to be aware that they may need to change their current practice to carefully document the creation of any joint account as consistent with a prior will or to anticipate the issue when drafting wills and address the issue of after-created joint accounts by expressly stating that such accounts may be created and are not inconsistent with the testator's wishes."

 Thank you to Lancaster Attorney Will Campbell for pointing out this very troubling decision.

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