Question

Thomas A. Carella filed for Chapter 7 bankruptcy. At the time, HSBC Bank USA held the sum of $16,540.94 on deposit in a joint bank account in the names of Carella and his father, Thomas J. Carella. The son sought to protect the money in the bank account, arguing that it was his father's account. The father had set up the joint account after finding out he needed to undergo heart bypass surgery. The father argues that he set up the joint account for convenience so that his son would have access to the money if the father passed away. The father survived the surgery and continued to manage the joint account. Only the father deposited or withdrew money from the account at any time. The son's bankruptcy trustee argued that the account was a gift causa mortis and thus is available as part of the bankruptcy. Did the joint account constitute a gift causa mortis? What are the necessary elements for establishing the joint account as a gift causa mortis? [In re Thomas A. Carella, 340 B.R. 710 (Bankr. W.D.N.Y. 2006).]

Answer 1

Did the joint account constitute a gift causa mortis?

The money in the joint account was solely funded by the father and is the father’s property. He was the main contributor towardes the account There was an arrangement of a gift causa mortis, because the father was going into heart bypass surgery and wanted to leave the money to his son if by chance he had died. The father did not die and since he is still alive the gift was never completed.

Yes,

The joint account was a gift causa mortis since the stipulation for the transfer of ownership was in case of the father’s death. The father must set up documentation stating that in the case of his death his son will take ownership of his account.

A joint account may fulfill the requirement of "convenience" in many different ways. Some depositors may seek the convenience of a second party to handle transactions, or the convenience of a "stand-by" arrangement in the event of an unforeseen calamity. But other depositors may also seek the convenience of a testamentary declaration without the formality of a will execution. In all instances, the key issue is whether a party truly intends to transfer ownership, or merely seeks a short-hand method to accomplish some other legitimate purpose.

Here, the father intended to retain an account that he wished to earmark for a testamentary disposition to his son. Perhaps he might more effectively have accomplished this purpose through use of a will or trust. Nonetheless, through clear and convincing evidence of control, the father has demonstrated that he created the joint account for his own convenience and without any transfer of ownership. Thus, in my view, he has overcome the presumption of joint ownership.

What are the necessary elements for establishing the joint account as a gift causa mortis?

1. The donor must intend to make an immediate transfer of to the person whom they wish to give the gift.
2. The gift must be delivered to the person receiving the gift. If personal delivery is impossible or impractical, then symbolic or constructive delivery will be sufficient. By doing so, the donor relinquishes their ownership to the property.
3. The donee must accept the gift. Generally, courts will presume acceptance of a gift if it is unconditional or valuable.
4. The donor must be acting out of the a belief of impending or imminent death. The donor cannot merely have a general apprehension of dying at some point in the future.