BILL ANALYSIS
AB 69
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Date of Hearing: February 22, 2005
ASSEMBLY COMMITTEE ON JUDICIARY
Dave Jones, Chair
AB 69 (Harman) - As Introduced: January 3, 2005
PROPOSED CONSENT (As Proposed To Be Amended)
SUBJECT : MULTI-PARTY ACCOUNTS: DETERMINING WHO OWNS WITHDRAWN
FUNDS
KEY ISSUE : SHOULD THIS NON-CONTROVERSIAL BILL BE ENACTED TO
CLARIFY WHO OWNS FUNDS WITHDRAWN FROM A MULTI-PARTY ACCOUNT?
SYNOPSIS
This non-controversial bill, sponsored by the California Law
Revision Commission (CLRC or Commission) seeks to implement a
Commission recommendation to revise the relevant statute. The
bill clarifies that the ownership of funds withdrawn from a
joint account is determined by the net contributions the parties
make to the account. The bill reverses Lee v. Yang in which the
court allowed a withdrawing party to keep the funds withdrawn
from a joint account, without regard to the source of the funds.
The bill also clarifies the existing rule that the right of
survivorship does not apply to overwithdrawn funds (funds
withdrawn in excess of those deposited). Finally, the bill
makes conforming changes that clarify that no new obligations
are imposed on financial institutions to monitor the deposits or
withdrawals of the joint account holders.
SUMMARY : This bill seeks to revise sections of the Probate
Code that govern multi-party accounts. Specifically, this bill :
1)Provides that the ownership interests in a multi-party account
are proportional to the contributions made to the account by
each of the parties.
2)Provides that the "proportional ownership interest" rule also
applies to funds withdrawn from the multi-party account.
3)Makes needed clarifying changes to the right of survivorship.
4)Makes conforming changes that insulate financial institutions
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from any duty or obligation to monitor deposits or withdrawals
of the multi-party account holders or otherwise determine
their net contributions to the account.
EXISTING LAW :
1)Recognizes that multi-party accounts are held by the parties
for their mutual use and are therefore not presumed to be a
lifetime gift. (Probate Code Section 5301(a). Hereafter all
references are to this code unless otherwise noted. See also
Section 6-103 of the Uniform Probate Code (1987) upon which
Section 5301 is based, see also Section 6-103 comment.)
2)Provides that parties to a joint account have unrestricted
withdrawal rights. (Section 5130.)
3)States that a multi-party account belongs, during the lifetime
of all parties, in proportion to the net contributions by each
party to the sums of deposit, unless there is clear and
convincing evidence of a different intent. (Section 5301,
which is based on Section 6-103 of the Uniform Probate Code
(1987); this is the so-called "net contribution" rule.)
4)Provides that on death of a joint owner, the funds on deposit
belong to the survivor(s) unless there is clear and convincing
evidence of a different intent. (Section 5302.)
5)Does not require a financial institution to monitor deposits
or withdrawals to an account or to otherwise determine any
party's net contribution to the account. (Section 5401.)
6)Requires that a statute based on a Uniform Act must be
construed uniformly. (Prob. Code Section 2(b).
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
COMMENTS : According to the author, AB 69 would overturn a
recent case by making three changes to existing law in order to
clarify the rules governing the ownership of multi-party account
funds between non-spousal parties.
Bill Would Overturn Recent Court Ruling in Lee v. Yang. This
bill seeks to address the appellate court's interpretation in
Lee v. Yang, 111 Cal. App. 4th 481, 3 Cal. Rptr. 3d 819 (2003).
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In Lee, the court allowed a party to a multi-party account to
keep funds withdrawn although they exceeded the withdrawing
party's net contribution to the account. The CLRC seeks to
reverse the holding by amending the California Multi-Party
Account Law (CAMPAL) to provide that funds in a multi-party
account are owned by the parties in proportion to their net
contributions whether or not the funds remain on deposit.
Current law requires that a statute based on a Uniform Act must
be construed uniformly. Importantly, the statutory scheme, as
incorrectly interpreted in Lee v. Yang, is inconsistent with the
findings in other jurisdictions. The courts of other states
that have enacted the Uniform Act have concluded that the
withdrawing party's ownership right must be limited to the
party's net contribution. (See Erhardt v. Leonard, 104 Idaho
197, 657 P.2d 494 (Idaho App. 1983), Matter of Estate of
Maxfield, 856 P.2d 1056 (Utah 1993), Vaughn v. Bernhardt, 345
S.C. 196, 547 S.E.2d 869 (2001).) This corrective legislation
would also guide the courts to uniformly construe the law as
required when it is based on a Uniform Act.
Bill Would Restore Original Intent of California Multi-Party
Account Law. The CAMPAL found in the Probate Code Section 5100
et seq., was originally adopted to avoid the imputation of a
gift on sums deposited into a joint tenancy account. Prior to
CAMPAL any funds deposited into a multi-party account
automatically became the property of the co-tenants in equal
shares. With the adoption of Section 5301, a multi-party
account belongs, during the lifetime of all parties, in
proportion to the net contributions by each party to the sums of
deposit, unless there is clear and convincing evidence of a
different intent.
This bill would clarify that ownership of account funds are
determined proportionally by the net contribution made to the
joint account. The ownership interests are not determined by
the right to withdraw from the account. This clarification
would protect multi-party account holders from the instance
where an account holder asserts ownership interest in the other
account holder's funds simply because he or she has the power in
a joint account to withdraw the funds.
Clarifies An Existing Right Of Survivorship Rule For The
Account . Under existing law, there is a presumption that when
one person in a joint account dies the other will become the
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owner of the account. However, this right of survivorship for
the account is not unlimited. While joint tenants can remove
their funds from the reach of the survivorship rule if they
withdraw them from the joint account, this bill will clarify
that they cannot extend the right of survivorship to funds that
they do not own if they are withdrawn prior to the death of the
other party. As a matter of policy, joint tenants must not be
allowed to assert ownership interests in funds that they do not
own simply because they have the right to withdraw and do so
prior to the death of the other account holder. This bill
appropriately clarifies that a withdrawing party may not alter
property rights in the account by withdrawing funds prior to the
death of the depositing party.
Protection of Financial Institutions. Under the provisions of
this bill, no additional duties are imposed on financial
institutions to monitor deposits or withdrawals to an account
for the purpose of determining the proportionate contributions
of the parties.
Author's Proposed Technical Amendment . In order to clarify to
which party the bill refers, the author properly proposes to
amend Section 5303 (c), lines 33-34 to read as follows:
with respect to the funds withdrawn to the extent of the
withdrawing party's net contribution to the account.
REGISTERED SUPPORT / OPPOSITION :
Support
California Law Revision Commission (sponsor).
Opposition
None on file.
Analysis Prepared by : Cynthia Alvillar / JUD. / (916)
319-2334