Proposed Bill to Amend NY Banking Law § 675

SUMMARY

The Trusts, Estates & Surrogate’s Court Committee, the Estate and Gift Taxation Committee, and the Banking Law Committee submitted a joint letter to the Surrogate’s Court Advisory Committee of the Office of Court Administration in support of a proposed amendment to New York Banking Law Section 675. Under current law, when a joint bank account includes a non-spousal signatory (e.g., a child), it is presumed that the depositor (e.g., a parent) has made an immediate gift of 50% of the account to the non-depositor. This presumption often does not reflect the actual intent of the account holder and has led to unintended gifts and costly litigation, especially involving non-spousal joint accounts.

The Committees believe the proposed bill better aligns with the expectations of most individuals when establishing joint accounts. It retains the presumption of joint ownership with survivorship rights for spousal accounts, based on the account holders’ representation of their marital status. For non-spousal accounts, the bill eliminates the presumption of an immediate gift and instead treats such accounts as convenience accounts, unless the depositor expressly designates survivorship rights. This amendment is expected to more accurately reflect depositors’ intentions and significantly reduce post-death legal disputes.

REPORT

By Email

Honorable Renee R. Roth, Co-Chair
Honorable Peter J. Kelly, Co-Chair
Surrogate’s Court Advisory Committee
Office of Court Administration
25 Beaver Street, 10th Floor
New York, NY 10004

RE: PROPOSED BILL TO AMEND NY BANKING LAW § 675

Dear Judge Roth and Judge Kelly:

The New York City Bar Association (the “City Bar”), through its Trust, Estates & Surrogate’s Courts Committee, Estate and Gift Taxation Committee, and Banking Law Committee (the “Committees”), has reviewed and discussed a proposed bill to amend New York Banking Law Section 675 (the “Bill”), a copy of which is enclosed.

The Committees find the proposed Bill aligns with the expectations of most people when opening a joint bank account. The current law does not. Consequently, in the experience of our Committees, estates are too often burdened with costly litigation. In our view, the proposed Bill will reduce, if not avoid, such litigation.

For an account opened by spouses the common expectation is that the funds in that account are “our” money (i.e., the current moiety rule applies) and that the funds would pass to the surviving spouse. This is retained in the proposed Bill. The proposed Bill does not require a bank to investigate, or otherwise confirm, that the individuals are actually spouses. Their representation would be sufficient to protect the bank.

For an account where one of the signatories is not a spouse, current law provides that the depositor (e.g., the parent) is making a gift of 50% of account to the non-depositor (e.g., the child). This is not what most people think or want. As banks refuse to offer convenience accounts, upon the depositor’s death, the account passes by presumption of survivorship. Again, this is not most people’s expectations, especially if the other signatory is one of several children and other children are intended to share more or less equally in their parent’s estate. The expectation of the parent is usually that a child is placed on the account for purposes of conducting banking transactions on the parent’s behalf, not to give half of the account to the child presently and the entire account on the parent’s death.

Under the proposed Bill, in the non-spouse scenario, there is no gift (i.e., the moiety rule does not apply) and the survivorship interests in the signatory child/non-depositor would only arise if the parent/depositor affirmatively elects that result on the signature card. If no such election is made, upon the death of the depositor, the balance in the account passes through his/her estate, not by operation of law to the survivor. In sum, the result is the account is a true convenience account.

Thank you for considering our comments. If you believe it to be beneficial, the City Bar would be happy to discuss these comments with you further.

Sincerely yours,

Brian P. Corrigan, Chair
Trusts, Estates & Surrogate’s Courts Committee

Kevin Matz, Chair
Estate and Gift Taxation Committee

Anna Pinedo, Chair
Banking Law Committee*[i]