BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1624|
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CONSENT
Bill No: AB 1624
Author: Gatto (D)
Amended: 7/6/12 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE : 4-0, 7/3/12
AYES: Evans, Blakeslee, Corbett, Leno
NO VOTE RECORDED: Harman
ASSEMBLY FLOOR : 69-0, 3/22/12 - See last page for vote
SUBJECT : Multiple-party accounts
SOURCE : Author
DIGEST : This bill provides that funds in a
multiple-party account belong to each party to the account
in proportion to the net contributions of each party, and
any right of survivorship to the funds is eliminated with
respect to the funds withdrawn to the extent of the
withdrawing party's net contribution to the account. This
bill also clarifies the ownership interest of parties in
withdrawals made in excess of a withdrawing party's net
contribution. This bill provides that, when a withdrawing
party uses the funds for the benefit of another party, and
that party, or his/her conservator, guardian, or agent,
seeks to recover the amount withdrawn in excess of the
withdrawing party's contribution, a court can, at its
discretion and in the interest of justice, reduce the other
party's ownership interest in the amount withdrawn.
CONTINUED
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ANALYSIS : Existing law, the California Multiple-Party
Accounts Law (CAM-PAL), establishes provisions governing
the ownership of a multiple-party account in a financial
institution, rights of creditors to the funds on account,
and provides simplified procedures for transferring funds
following the death of a depositor. (Probate Code (PROB)
Section 5100 et seq.)
Existing law provides that a "multiple-party account" means
a joint account, a pay on death (P.O.D.) account, or a
Totten trust account. (PROB Section 5132)
Existing law defines "joint account" to mean an account
payable on request to one or more of two or more parties
whether or not mention is made of any right of
survivorship. (PROB Section 5130)
Existing law defines "P.O.D. account" to mean (1) an
account payable on request to one person during the
person's lifetime and on the person's death to one or more
P.O.D. payees; or (2) an account payable on request to one
or more persons during their lifetimes and on the death of
all of them to one or more P.O.D. payees. (PROB Section
5140)
Existing law defines "Totten trust account" to mean an
account in the name of one or more parties as trustee for
one or more beneficiaries where the relationship is
established by the form of the account and the deposit
agreement with the financial institution and there is no
subject of the trust other than the sums on deposit in the
account. (PROB Section 80)
Existing law provides that the "net contribution" of a
party to an account at any given time is the sum of all of
the following:
1. All deposits thereto made by or for the party, less all
withdrawals made by or for the party that have not been
paid to or applied to the use of any other party;
2. A pro rata share of any interest or dividends earned,
whether or not included in the current balance; and
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3. Any proceeds of deposit life insurance added to the
account by reason of the death of the party whose net
contribution is in question. (PROB Section 5134(a))
Existing law provides that, in the absence of proof
otherwise, only parties who have a present right of
withdrawal shall be considered as having a net
contribution, and the net contribution of each of the
parties having a present right of withdrawal is deemed to
be an equal amount. (PROB Section 5134(b))
Existing law provides that a multiple party account
belongs, during the lifetime of all parties, to the parties
in proportion to the net contributions by each to the sums
on deposit, unless there is clear and convincing evidence
of a different intent. Existing law provides that, for a
P.O.D. account, the P.O.D. payee has no rights to the sums
on deposit during the lifetime of any party, unless there
is clear and convincing evidence of a different intent.
Existing law also provides that, for a Totten trust
account, the beneficiary has no rights to the sums on
deposit during the lifetime of any party, unless there is
clear and convincing evidence of a different intent. If
there is an irrevocable trust, the account belongs
beneficially to the beneficiary. (PROB Section 5301)
This bill provides that a multiple party account belongs,
during the lifetime of all parties, to the parties in
proportion to the net contributions by each, unless there
is clear and convincing evidence of a different intent.
This bill provides that, if a party makes an excess
withdrawal from an account, the other parties to the
account shall have an ownership interest in the excess
withdrawal in proportion to the net contributions of each
to the amount on deposit in the account immediately
following the excess withdrawal, unless there is clear and
convincing evidence of a contrary agreement between the
parties. This bill defines "excess withdrawal" as the
amount of a party's withdrawal that exceeds that party's
net contribution on deposit in the account immediately
preceding the withdrawal.
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This bill provides that only a living party, or a
conservator, guardian, or agent acting on behalf of a
living party, shall be permitted to make a claim to recover
the living party's ownership interest in an excess
withdrawal. This bill authorizes a court, at its
discretion, and in the interest of justice, to reduce any
recovery from an excess withdrawal to reflect funds
withdrawn and applied solely for the benefit of the
claiming party.
Existing law provides that sums remaining on deposit at the
death of a party to a joint account belong to the surviving
party or parties as against the estate of the decedent
unless there is clear and convincing evidence of a
different intent. If there are two or more surviving
parties, their respective ownerships during lifetime are in
proportion to their previous ownership interests augmented
by an equal share for each survivor of any interest the
decedent may have owned in the account immediately before
the decedent's death; and the right of survivorship
continues between the surviving parties. (PROB Section
5302(a).) Existing law provides additional provisions on
right rights to sums remaining on deposit for P.O.D.
accounts and Totten trust accounts. (PROB Section 5302(b),
(c))
Existing law provides that, during the lifetime of a party,
the terms of the account may be changed to eliminate or to
add rights of survivorship. Withdrawal of funds from the
account by a party with a present right of withdrawal
during the lifetime of a party also eliminates rights of
survivorship upon the death of that party with respect to
the funds withdrawn. (PROB Section 5303(c))
This bill provides that withdrawal of funds from the
account by a party would eliminate rights of survivorship
with respect to the funds withdrawn to the extent of the
withdrawing party's net contribution to the account.
Existing law provides that, with respect to multiple-party
accounts, a financial institution is not required to do any
of the following:
inquire as to the source of funds received for deposit to
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a multiple-party account, or inquire as to the proposed
application of any sum withdrawn from an account, for
purposes of establishing net contributions;
determine any party's net contribution; or
limit withdrawals or any other use of an account based on
the net contribution of any party, whether or not the
financial institution has actual knowledge of each
party's contribution. (PROB Section 5401(c))
This bill provides clarifying cross-references to this
provision.
Background
In 1983, the California Law Revision Commission (CLRC)
recommended the adoption of certain provisions of the
Uniform Probate Code regarding interests of multiple
parties to funds held in one bank account. (Recommendation
Relating to Nonprobate Transfers, 16 Cal. Law Revision Com.
Rep. (1982) p. 126.) CLRC's recommendation was enacted,
which created the California Multiple-Party Accounts Law
(CAM-PAL) and applied to interests of multiple parties in
funds held in credit union and industrial loan company
accounts. In 1989, CLRC recommended amendments to CAM-PAL,
among other things, to extend its application to banks and
savings and loan associations and to clarify survivorship
rights of the parties to a multiple-party account.
(Recommendation Relating to Multiple-Party Accounts in
Financial Institutions (Feb. 1989) 20 Cal. Law Revision
Com. Rep. (1990) p. 95.) The Legislature enacted the
CLRC's proposal under SB 985 (Beverly, Chapter 397,
Statutes of 1989), which was subsequently recast under AB
759 (Friedman, Chapter 79, Statutes of 1990) when the
Probate Code was revised.
Later, the First District Court of Appeal ruled, in Lee v.
Yang (2003) 111 Cal.App.4th 481, that funds in a
multiple-party account can be withdrawn by any party to the
account, regardless of which party deposited the funds.
The CLRC recommended clarification of CAM-PAL "to make
clear that ownership of funds withdrawn from a joint
account is determined by the net contributions of the
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parties to the account, thereby reversing the rule of Lee
v. Yang." (Recommendation: Ownership of Amounts Withdrawn
from Joint Account (June 2004) 34 Cal. Law Revision Com.
Rep. (2004) p. 203)
This bill is similar to AB 69 (Harman, 2005) and SB 273
(Harman, 2011), both of which would have adopted the CLRC's
2004 recommendations to overturn Lee v. Yang, but both
bills died in the Senate Judiciary Committee without
hearing. Unlike the prior bills, this bill would clarify
the ownership interest of parties in another party's excess
withdrawals and provide protection for a party who
withdraws money on behalf of another party to the account.
This bill returns California law to its original intent
prior to the holding in Lee v. Yang (2003) 111 Cal.App.4th
481 that money in a multiple-party account belonged to each
party in proportion to the net contributions by each party
to the sums on deposit. Essentially, this bill provides
that, when non-married individuals have a joint account,
each party owns the amount he or she has deposited into the
account, unless otherwise agreed by the parties. The
author argues that the Lee v. Yang decision created a "race
to the bank," where if one party falls out of favor with
another party, the first party could withdraw all funds in
the account, even though they did not deposit anything.
In Lee v. Yang, plaintiff Holden Lee sued his ex-fiancé,
defendant Janet Yang, for recovery of his money that she
withdrew from their multiple-party account. During Yang's
engagement to Lee, Yang discovered Lee had been involved in
same-sex relationships. The engagement was broken off, and
Yang withdrew over $340,000 of comingled funds from the
multiple-party account and closed out the account. The
court held there was no agreement between the parties
restricting Yang or the amount she could withdraw from the
account, and "Ýt]he inescapable inference is that likewise
there was no restriction on the use of the withdrawn funds
and hence no legal obligation to account for or return
them. By virtue of ÝYang's] unrestricted right to withdraw
and apply funds to her own benefit, the ownership of the
funds passed to her by way of gift. ?" (Lee v. Yang (2003)
111 Cal.App.4th at p. 493; emphasis in original.) The
dissent argued that the legislative history of
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multiple-party account ownership showed that the intent of
CAM-PAL was for parties to retain their ownership interests
in their deposited funds, according to their net
contribution, and the majority's opinion, by creating a
presumption that a party was not entitled to recoup any of
his or her own funds, thwarted the basic purpose of
CAM-PAL. (Id. at p. 496.)
Following the Lee v. Yang decision, the CLRC issued a
recommendation that CAM-PAL be clarified to provide that
ownership of funds withdrawn from a multiple-party account
is based upon the proportionate contributions of the
parties to the account. (Recommendation: Ownership of
Amounts Withdrawn from Joint Account (June 2004) 34 Cal.
Law Revision Com. Rep. (2004) p. 203.) The CLRC argued
that "Lee v. Yang was incorrectly decided. The effect of
the decision is the opposite of that intended by the law.
Under prior law, the depositor was presumed to own an equal
share of funds withdrawn from a joint account. The
Multiple-Party Accounts law presumes the depositor owns
funds withdrawn based on the depositor's net contributions.
Lee v. Yang, however, presumes the depositor owns none of
the funds withdrawn." (Recommendation: Ownership of
Amounts Withdrawn from Joint Account (June 2004) 34 Cal.
Law Revision Com. Rep. (2004) p. 208)
The CLRC notes that the majority opinion in Lee v. Yang
based the decision on a misconstruction of the federal gift
tax rule, but "Ýa]s the dissent in Lee v. Yang rightly
points out, the court's reliance on federal estate tax law
for its answer to the state property law issue begs the
question. ? When confronted with the issue of
overwithdrawal by a party to a joint account, the courts of
other states that have enacted the uniform act have
invariably concluded that the withdrawing party's ownership
right must be limited to the party's net contribution."
(Id. at pp. 208-209.) This bill adopts the CLRC's
recommendation and clarify that a multiple-party account
belongs, during the lifetime of all parties, to the parties
in proportion to the net contributions by each, instead of
by each to the sums on deposit.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
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SUPPORT : (Verified 7/6/12)
AARP California
Conference of California Bar Associations
Executive Committee of the Trusts & Estates Section of the
State Bar of California
Professional Fiduciary Association of California
ARGUMENTS IN SUPPORT : The author writes:
Lee v. Yang created a presumption that whoever withdraws
the money gets to keep it unless the account holder who
contributed the funds can prove that there was an actual
agreement to the contrary. Ordinary people have no way
to know of the need for such an agreement.
Lee vs. Yang particularly places the elderly at risk,
because elders commonly use these accounts to enable a
relative (often one of the depositor's children) to
assist with paying bills or to avoid conservatorship or
probate administration of their assets. When making
these arrangements, the elderly generally do not expect
or intend that they are making a present gift of those
funds; however, that is exactly what Lee v. Yang holds
should a person added to a Multiple-Party Account to
assist an elderly friend or relative decide to take the
monies. While we all hope that family members will
provide honest assistance to their elderly relatives, it
is a reality that most elder abuse is committed by family
members that the elderly persons trusts. Further, due to
the mental problems commonly associated with aging, the
elderly are at a particular disadvantage when trying to
recover their funds once they discover that those funds
have been taken by a person they trusted.
It is also inconsistent with common sense and fairness
for unmarried couples using joint tenancy bank accounts
to allow whoever decides to terminate the relationship to
take and keep all of the couple's money.
AB 1624 is needed both to restore the fair and reasonable
intention of the Legislature when the California
Multiple-Party Accounts Law was enacted and to generally
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comply with the intent of the parties on an account that
their ownership is based on their individual
contributions to the account rather than whoever gets to
the bank first.
ASSEMBLY FLOOR : 69-0, 3/22/12
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Campos, Carter, Cedillo,
Chesbro, Conway, Cook, Davis, Dickinson, Donnelly, Eng,
Feuer, Fong, Fuentes, Beth Gaines, Galgiani, Garrick,
Gatto, Gordon, Grove, Hagman, Halderman, Hayashi, Roger
Hernández, Hill, Huber, Hueso, Huffman, Jeffries, Jones,
Knight, Lara, Ma, Mansoor, Mendoza, Miller, Mitchell,
Monning, Morrell, Nielsen, Norby, Olsen, Pan, Perea, V.
Manuel Pérez, Portantino, Silva, Smyth, Solorio, Swanson,
Torres, Wagner, Wieckowski, Williams, Yamada, John A.
Pérez
NO VOTE RECORDED: Charles Calderon, Fletcher, Furutani,
Gorell, Hall, Harkey, Logue, Bonnie Lowenthal, Nestande,
Skinner, Valadao
RJG:m 7/6/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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