A court decision in Virginia highlights the potential dangers of relying on joint accounts for estate planning. Caine v. NationsBank, N.A. (Va. Sup. Ct., No. 002615, Sept. 14, 2001).

In May 1989, Dr. Andrew A. Freier opened a joint checking account in his name and that of his daughter, Susan Freier Caine, at NationsBank. In 1998, when Dr. Freier''s health began to decline, his wife asked the bank to add her to the account so that she could pay bills. Although she was told by a bank employee that the signatures of all parties to the account would be required to make such a change, Mrs. Freier returned a new signature card to the bank that contained the signatures of only herself and her husband. The bank nevertheless added Mrs. Freier to the account.

From January 2 through February 3, 1998, Mrs. Freier wrote thirty-five checks totaling $100,181.13 on the account, including one check for $75,000, which was deposited to her own account on January 27, 1998, the day Dr. Freier died.

Mrs. Caine sued the bank for $100,181.13 plus interest, claiming that the bank breached its contract with her when it added Mrs. Freier to the joint account without her permission. The trial court ruled in favor of the bank, holding that Virginia law allows a new owner to be added to a joint account without the consent of all parties. Mrs. Caine appealed.

The Virginia Supreme Court also sided with the bank. In reaching its decision, the court focused on the wording of the joint account contract, which states that "[e]ach owner appoints all other owners as his or her agent to endorse, deposit, withdraw and conduct business for the account." The court said that “conduct business for the account” can include adding a party to the account.

Joint accounts have been viewed as “the common person’s estate plan” because they look like an easy way to distribute assets and avoid probate. But, as this case illustrates, there are serious risks involved. This is why most elder lawyers suggest that clients consider other methods of managing their finances, such as powers of attorney and revocable living trusts.