October 31, 2011
Authored by: Luke Lantta
Joint tenant with right of survivorship accounts are commonly used to transfer assets outside of probate. They also tend to lead to a lot of estate litigation. The concept of a JTWROS account is simple enough: the tenants have an equal right to the account’s assets and the survivor gets the assets when the other account holder dies.
What if someone doesn’t want to make an inter vivos gift of his or her cash or other valuable personal property, but instead wants it to be transferred outside of probate upon his or her death? Can something like a joint tenant with right of survivorship safe deposit box work? If your plan is to use a ‘joint’ safe deposit box, then you better pay careful attention to the safe deposit box contract. At least that was what was decided by the Georgia Court of Appeals in Longstreet v. Decker.
Kathy Longstreet was the niece of Marjean Smith. Many years before Smith’s death, Smith and Longstreet entered into a contract to lease a safe deposit box. The contract had the heading “THE BRAND BANKING COMPANY [,] Lawrenceville, Georgia [,] JOINT CONTRACT [,] EITHER/ANY TO HAVE ACCESS ALONE.” The lease contract named Smith and Longstreet as joint tenants of a particular safe deposit box and provided in part:
It is agreed that any one of us alone shall be entitled to access to said box and control over its contents and shall have the right to surrender said box and cancel this contract on behalf of all . . . .
In the event of the death of any of us, the Bank . . . shall afford access to such box to the survivor or survivors of us, or any one of them.
Smith placed cash in the safe deposit box. Longstreet did not know what was in the box, other than that its contents were “valuable.”
Longstreet recognized that the contents of the box were Smith’s property during Smith’s life, but understood that the contents would be given to her upon Smith’s death. Smith also told Longstreet to “hold on to [the key],” and that “if anything ever happened to her, that [Longstreet] should remove the contents of the safe deposit box.” Longstreet understood Smith’s words to mean that whatever was in the safe deposit box belonged to her upon Smith’s death.
Smith died, and Longstreet, for the first time, accessed the box, and removed several bundles of cash from the box. Alleging that the cash removed from the box belonged to Smith’s estate, Joseph Decker, the executor of the estate of Marjean Smith, sued Longstreet for conversion and money had and received.
Longstreet argued that the safe deposit box lease contract authorized her to have “access to said box and control over its contents.” She also argued that she had survivorship rights in the contents because the safe deposit box contract provided “[i]n the event of the death of any of us, the Bank . . . shall afford access to such box to the survivor or survivors of us, or any one of them.” Longstreet also argued that Smith made an inter vivos gift to her of the contents of the safe deposit box. The Georgia Court of Appeals disagreed with Longstreet on each argument.
First, the safe deposit box contract governed rental of the safe deposit box, not ownership of the contents of the box. Control over the box and ownership of the contents of the box are two very separate things. While the contract mentioned control, there was nothing in the contract to establish ownership over the contents. Furthermore, the survivorship language in the contract that was relied upon by Longstreet concerned access, not ownership.
Second, the Georgia Court of Appeals also took the occasion to construe O.C.G.A. § 7-1-813(a), which provides that sums remaining on deposit at the death of a party to a joint account belong to the surviving party as against the estate of the decedent, unless there is clear and convincing evidence of a different intent at the time the account was created. Longstreet tried to argue that a joint safe deposit box is similar to a joint account. The appellate court ruled that leasing a safe deposit box does not come within the definition of a joint account for the purposes of this Georgia statute.
Third, there was no evidence that an inter vivos gift was made. To constitute a valid inter vivos gift, (1) the donor must intend to give the gift, (2) the donee must accept the gift, and (3) the gift must be delivered or some act which under law is accepted as a substitute for delivery must be done. To be effective, delivery must be made during the donor’s lifetime. Longstreet contended that delivery was shown by Smith providing her with a key to the box and telling her that whatever was in the box belonged to Longstreet. The Court of Appeals determined that no delivery was made during Smith’s lifetime because Smith retained a key to the box. Thus, the contents of the box could have been reclaimed by Smith at any time prior to her death. This continuing joint access to the box differentiated this case from those where a donor gives all keys to a safe deposit box to a donee, thus depriving the donor of access to the box and an opportunity to remove the contents of the box.
The lesson here is that if you want to transfer ownership of the contents of a safe deposit box, then be specific – access, control, and the like do not equate to ownership. Cases in other jurisdictions refer to safe deposit box contracts that do address ownership, so if you plan to use a safe deposit box to transfer ownership of the contents of the box, then make sure that the contract specifically addresses ownership as opposed to solely control of or access to the box.