Bank accounts are often established in the name of more than one party. Questions may arise regarding the rights of ownership of these accounts, during the lifetime of the owners or after an owner’s death. In New Jersey, joint accounts (using either an “and” or an “or” designation), and payable-on-death (“POD”) accounts, referred to as “Multiple-Party Deposit Accounts,” are governed by the New Jersey Multiple-Party Deposit Account Act, N.J.S.A. 17:16I-1 to -17.

During the lifetime of the parties, a joint account (whether an “and” or an “or” designation) belongs to the parties “in proportion to the net contributions by each to the sums on deposit,” unless a contrary intent is clear by the terms of the contract, deposit agreement, or other clear and convincing evidence. N.J.S.A. 17:16I-4(a). If there is no proof as to the contributions, the account belongs in equal shares to all parties that have a present right to withdraw from the account. In other words, if the account is titled as “John Smith and Kathy Jones,” or “John Smith or Kathy Jones,” unless there is proof as to contrary intent or proof as to contributions of each, John Smith and Kathy Jones are each considered to own a 50% share of the account.

During the lifetime of the original payee of a POD account, the account belongs to that original payee, and not to the POD payees. N.J.S.A. 17:16I-4(b). In other words, if an account is titled as “John Smith, payable on death to Kathy Jones,” then the account belongs to John Smith during John’s lifetime.

When a party to a joint account dies, the remaining funds in the account belong to the surviving party, rather than to the deceased account-holder’s estate, unless there is “clear and convincing evidence” of a contrary intention when the account was opened. N.J.S.A. 17:16I-5(a). Therefore, upon John Smith’s death, an account titled as “John Smith and Kathy Jones” or “John Smith or Kathy Jones” will ordinarily belong to Kathy Jones, rather than to the estate of John Smith.

When the original payee of a POD account dies, the remaining funds in the account belong to the surviving POD payee(s), or to the survivor of them, if one or more dies before the original payee dies. Thus, an account titled as “John Smith, payable on death to Kathy Jones” will belong to Kathy Jones upon John Smith’s death. If there is more than one surviving party (because the account is titled as “John Smith, payable on death to Kathy Jones and Susan White”), then at John Smith’s death, Kathy Jones and Susan White will own the account; however, there is no right of survivorship as between Kathy and Susan, unless specified in the account or deposit agreement. N.J.S.A. 17:16I-5(b).

Notably, the Multiple-Party Deposit Account Act provides that the right of survivorship that arises from a multiple-party account cannot be changed by Last Will and Testament. N.J.S.A. 17:16I-5(e).

The statute provides protection to banks holding multiple-party accounts. According to N.J.S.A. 17:16I-8, a bank is not required to make inquiry as to the source of funds received for deposit to an account, or sums withdrawn, for purposes of establishing the net contributions of the parties. A bank is also permitted to make payments, on request, “to any one or more of the parties.” A “party” is defined as a person with a present right to payment from an account; therefore, a POD payee only becomes a “party” after the death of the original payee. N.J.S.A. 17:16I-2.

In addition, any funds in a joint account can be paid by the bank, upon request, to any “party” to the account, without regard to whether any other party to the account is incapacitated or deceased, although payment cannot be made to a deceased party’s executor/administrator/heirs unless proof is provided that the decedent was the last surviving party on the account, or unless there is no right of survivorship under the statute. N.J.S.A. 17:16I-9.

With respect to a POD account, payment can be made by the bank, upon request, to the original party to the account; or to the POD payee upon proof that the POD payee survived the original party to the account. N.J.S.A. 17:16I-10.

The Multiple-Party Deposit Account Act also addresses situations in which the estate of a deceased party has insufficient assets to pay debts, taxes, and administrative expenses. In such a case, the Act provides that “no multiple-party account will be effective against [the] estate… to transfer to a survivor sums needed to pay debts, taxes, and expenses of administration.” N.J.S.A. 17:16I-7. Therefore, if a surviving party or POD payee receives payment from the multiple-party account after the death of the deceased party, that surviving party must account to the estate’s executor/administrator for the amount that was beneficially owned by the decedent just prior to his/her death, to the extent necessary to discharge those estate claims/expenses. An action to assert liability against the surviving party cannot be brought unless the executor/administrator has received a written demand from a creditor, and the action must be commenced within 2 years of the decedent’s death. Id.