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Beatty v. Holmes, 233 S.W.3d 475 (Tex. App.—Houston [14^th Dist.] 2007, pet. filed).

Other Estate Planning Matters

Multiple Party Accounts

Joint Account

 Right of Survivorship Not Established

Husband and Wife opened a joint account containing community property.  Accordingly, compliance with Probate Code § 452 is required to create the survivorship feature.  The account contract indicated that the spouses held the account “JT TEN.”  The account contract had two provisions, one with clear survivorship language and the other with pay on death language, along with instructions to strike out whichever provision was inapplicable.  Neither provision was marked out.  The trial court held that the account had survivorship rights and the appellate court reversed.

The court explained that the letters “JT TEN” by themselves without either provision being marked out was insufficient.  The “JT TEN” indication merely showed an intent of Husband and Wife to hold as joint tenants but did not address the survivorship feature.  Under Probate Code § 452, clear survivorship language is required.  By not striking out the inapplicable provision in the contract, the spouses failed to indicate clearly their intent.  It was not enough that they did not fill-in the P.O.D. provision; they needed to affirmatively select the survivorship provision.  The court concluded that it was impossible to ascertain their intent with sufficient certainty to create the survivorship feature.

Moral:  The estate planner should carefully question each client about the existence of multiple-party accounts and determine if they were created correctly by personally inspecting the account contract.

Other Estate Planning Matters

Non-Probate Assets

Survivorship Feature Not Created

Husband and Wife held community property securities with the indication “JT TEN.”  On the back of the certificates, this phrase was explained as meaning “joint tenancy with right of survivorship and not as tenancy in common.”  Husband and Wife did not sign the certificates.  The probate court held that this was sufficient to create the survivorship feature.  The appellate court reversed.

After discussing the complex procedural background of the case, the court concluded that the only ground upon which the probate court could have granted a summary judgment that the securities had the survivorship feature was under Probate Code § 450.  The court held that since the securities were community property, the survivorship feature must be created under Probate Code § 452.  This section requires that both spouses sign the survivorship agreement.  Because Husband and Wife did not sign such an agreement, the securities lacked the survivorship feature despite the language contained on the certificates.  The court rejected the argument that because § 450 lacks a signature requirement, that the certificates had the survivorship feature.

The court recognized that this issue, that is, the interplay between § 452 (signatures required) and § 450 (no signatures required) had not been previously addressed by a Texas court.  The court explained that when § 450 was enacted in 1979, spouses could not yet hold community property in survivorship form; that was not allowed until the passage of a constitutional amendment in 1987.  Thus, the Legislature could not have intended § 450 to provide a method for spouses to use to create survivorship rights in community property.  Section 450 authorizes “pay on death” type provisions, not the creation of survivorship rights in community property.

Moral:  Survivorship agreements involving community property must comply with Probate Code § 452, that is, they must be (1) in writing, (2) signed by both spouses, and (3) contain express survivorship language.  A mere indication of the survivorship feature on a stock certificate is insufficient.

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