Ask the Probate Judge—Moral v. Legal Duties
By Merri Rudd, appeared July 25, 2002, Albuquerque Journal,
Reprinted with permission
Editor's note: This column may not be quoted or reproduced in whole
or part without express written permission of the author.
Q: My uncle died without a will recently. There is no spouse, but four surviving siblings. Two siblings were named on his bank accounts while the other two were not. It was implied and understood that everything, including bank accounts, were to be divided equally. Since only two siblings were actually NAMED on the bank accounts, do the other two have any rights to the money in these accounts?
A vast gulf can exist between legal duties and moral duties. State laws only cover legal duties. Consciences cover moral duties. "Implied and understood" is not the same as "in writing within a valid will."
How an account is titled controls who receives the property after the owner's death! Assets held in joint tenancy, payment on death (POD) accounts, transfer on death (TOD) accounts, life insurance, transfer on death deeds, and trust property pass automatically to the named survivor or beneficiary. A will does not affect these types of property since they pass "outside" of the will without a court probate proceeding. Your uncle's bank accounts legally pass to the siblings named on those accounts.
Another example: Mother has a will, leaving all of her property in equal shares to her four children. Mother adds Child A's name to her bank accounts and house, thinking that her will sets out her wishes. Mother dies. Who owns the bank accounts and house? Child A. Mother's will does not control who gets the property with Child A's name on it. That property passes automatically to Child A.
If your uncle's estate contains other assets worth over $30,000 that are titled in his sole name or as "tenants in common," those assets of his estate would need a court probate proceeding. Since your uncle died intestate, without a valid will, state law would split the probate assets among his heirs, the four siblings and children of any deceased siblings.
Sometimes the beneficiaries named on someone's accounts are the ones who helped that person the most during the person's lifetime. The beneficiaries feel they deserve the accounts. Other times beneficiaries are added to accounts as a convenience with the "understanding" that they are to share the assets equally with others.
Do the two siblings named on your uncle's accounts have a moral duty, if not a legal one, to share the wealth? If everyone agrees that that was your uncle's wish, they could choose to gift a portion of the accounts to the unnamed siblings. But the law does not require them to do so. Also, gifts over $11,000 per person per year should be reported on a federal gift tax return, IRS Form 709. Something to keep in mind should the siblings decide to let their consciences be their guides.
© 2002, Merri Rudd & Albuquerque Journal, All Rights Reserved