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Research on Rights over investment account and change in beneficiary

Author: LegalEase Solutions

QUESTIONS PRESENTED

  1. Is an investment account an asset of the father’s estate?
  2. Whether the father’s instructions can be enforced now, to add the son retroactive to the date of the original instruction or otherwise.
  3. Are any of the client’s possible claims subject to a statute of limitations? What is the statute of limitations?

SHORT ANSWERS

  1. Generally an investment account is property that will be included in a decedent’s estate. All property of a decedent shall be subject to the estates of decedents law.
  2. The father’s instruction may be enforced now under the rule of equity.
  3. The statute of limitations for the claims of negligence and breach of contract is three years. 

RESEARCH FINDINGS

  1. Whether an investment account is an assets of the father’s estate.

The Maryland statute on property of decedent subject to estates law provides that, “[a]ll property of a decedent shall be subject to the estates of decedents law, and upon the person’s death shall pass directly to the personal representative, who shall hold the legal title for administration and distribution, without any distinction, preference, or priority as between real and personal property.” Md. Code Ann., Est. & Trusts § 1-301(a). The term property “includes both real and personal property, and any right or interest therein.” Md. Code Ann., Est. & Trusts § 1-101(r). “‘Property’ refers to (1) all real and personal property of a decedent and (2) any right or interest therein which does not pass, at the time of the decedent’s death, to another person by the terms of the instrument under which it is held, or by operation of law.” Id.

Maryland courts have repeatedly considered investment accounts to be property included in the estate. (see Attorney Grievance Comm’n v. Thompson, 376 Md. 500, 505-06, 830 A.2d 474, 477-78 (2003) reinstatement granted sub nom. In re Reinstatement of Thompson, 385 Md. 466, 869 A.2d 837 (2005) (Decedent’s “estate was valued at approximately $488,000, of which approximately $470,000 was held in bank and investment accounts.”); Attorney Grievance Comm’n of Maryland v. Storch, 445 Md. 82, 124 A.3d 204, 206 (2015) (The court required the removed personal representative to deliver to the successor personal representative “all of the estate property: approximately $50,000 in a checking account, the decedent’s residence (worth approximately $264,000), [and] a Charles Schwab investment account” among others.)

However, a “[d]ecedent’s revocable inter vivos trust and IRA (individual retirement account) transfer-on-death (TOD) accounts were not part of his “net estate” . . . ; decedent did not have any interest in either the trust or the TOD accounts that survived his death.” Karsenty v. Schoukroun, 406 Md. 469, 959 A.2d 1147 (2008) (West’s Ann.Md.Code, Estates and Trusts, § 3–203(b)). Further, “[u]pon the death of a party to a multiple-party account, the right to any funds in the account is determined under the express terms of the account agreement.” Stanley v. Stanley, 175 Md. App. 246, 264, 927 A.2d 40, 51 (2007)

Generally an investment account is property that will be included in a decedent’s estate. However, those accounts which are named to pass on to a beneficiary or which are designated as Transfer on Death accounts will pass on to the named beneficiaries. All property which does not have any such designations will be part of the decedent’s estate.  If the father’s attempt to make son a joint owner is admitted retroactively, the son will have a right over the account based on survivorship.

  1. Whether the father’s instructions can be enforced now, to add the son retroactive to the date of the original instruction or otherwise.

Generally, “[e]quity regards and treats as done that which ought to be done, parties seeking relief in equity, and equity is concerned with substance not mere form.” Tydings & Rosenberg, LLP v. Zorzit, 422 Md. 582, 585, 30 A.3d 984, 986 (2011). (see Reliance Life Ins. Co. of Pittsburgh, Pa., v. Bennington, 142 Md. 390, 121 A. 369, 371 (1923) (Equity “will consider as done that which should have been done, and, when [someone] has complied with all the requirements of the rules he has done all that a court of equity demands”).

“In any particular case, the question whether a trust in law has been created effectually to vest the fund in the survivor depends entirely upon the actual intention of the original owner of the fund at the time he had the entry in the bank book made.” Whittington v. Whittington, 205 Md. 1, 8-9, 106 A.2d 72, 75 (1954).

“Maryland recognizes the constructive trust doctrine and has on numerous occasions applied it.” Peninsula Methodist Homes & Hosps., Inc. v. Cropper, 256 Md. 728, 737, 261 A.2d 787, 792-93 (1970) (citing  Mackey v. Davidson, 222 Md. 197, 205, 159 A.2d 838 (1960); **793 Nowell v. Larrimore, 205 Md. 613, 621, 109 A.2d 747 (1954); Carter v. Abramo, 201 Md. 339, 343, 93 A.2d 546 (1953); Bass v. Smith, 189 Md. 461, 470, 471, 56 A.2d 800 (1948); Long v. Huseman, 186 Md. 495, 507, 47 A.2d 75 (1946); Trossbach v. Trossbach, 185 Md. 47, 52, 42 A.2d 905 (1945); O’Connor v. Estevez, 182 Md. 541, 555, 35 A.2d 148 (1943); Springer v. Springer, 144 Md. 465, 479, 125 A. 162 (1924).)

Here, the father intended to make the son a joint owner of the account and communicated to the bank to make the changes and filled a Client Relationship Agreement. The bank communicated that the document has been approved and updated to the account accordingly. Thus, the father did all in his power to accomplish that purpose and reasonably could have been expected to do to effect the change. It is not the case that the father had an intent that he failed to follow through on. Only after the father’s death did it become clear that the Bank failed to add the son as a joint owner as it had promised. The attempt to make the son joint owner was substantially made by the father and equity calls for the Bank to make good on this promise.

  1. Are any of the client’s claims are subject to a statute of limitations, and what that would be?

Negligence

“The count[] for negligence is subject to the statute of limitations articulated in Section 5–101 of the Courts and Judicial Proceedings Article of the Maryland Code which requires that a claim must be filed within three years from the date the action accrues.” Litz v. Maryland Dep’t of Env’t, 434 Md. 623, 640, 76 A.3d 1076, 1086 (2013) (citing Booth Glass Co. v. Huntingfield Corp., 304 Md. 615, 500 A.2d 641 (1985) (applying § 5–101 to a negligence action)).

Further, “[t]he question of when a cause of action accrues is ordinarily ‘left to judicial determination.’” Id. at 641. (citing Frederick Road Ltd. P’ship v. Brown & Sturm, 360 Md. 76, 95, 756 A.2d 963, 973 (2000)). “The determination of when an action accrued may be based solely on law, solely on fact, or on a combination of law and fact.” Id. “When it is necessary to make a factual determination to identify the date of accrual, however, those factual determinations are generally made by the trier of fact, and not decided by the court as a matter of law.” Id. “The discovery rule tolls the accrual of the limitations period until the time the plaintiff discovers, or through the exercise of due diligence, should have discovered, the injury.” Frederick Rd. Ltd. P’ship v. Brown & Sturm, 360 Md. 76, 95-96, 756 A.2d 963, 973 (2000).

Breach of contract

“A civil action at law shall be filed within three years from the date it accrues unless another provision of the Code provides a different period of time within which an action shall be commenced.” CJP. § 5-101. “[T]he general statute of limitations for a breach of contract action is three years from the date the cause of action accrues, as set forth in CJP § 5–101.” Millstone v. St. Paul Travelers, 183 Md. App. 505, 511, 962 A.2d 432, 436 (2008) aff’d, 412 Md. 424, 987 A.2d 116 (2010).

Further, “[t]he general rule governing the commencement of the running of the statute of limitations is that the statutory period is computed from the time when the right of action that the plaintiff seeks to enforce first accrued . . . .” Id. at 512 (quoting 31 RICHARD A. LORD, WILLISTON ON CONTRACTS § 79:14 (4th ed.2004, updated through October 2008)). In an action based on a contract, “accrual occurs as soon as there is a breach of contract, with some courts qualifying this by stating that accrual occurs when the promisee discovers or should have discovered the breach, and others stating that accrual occurs upon breach, whether or not the promisee is then aware of the breach.” Id (See Boyd v. Bowen, 145 Md.App. 635, 669, 806 A.2d 314 (2002) (“In Maryland, a cause of action for breach of contract accrues when the contract is breached, and when the breach was or should have been discovered.”)).

Limitation on the Claims against the Estate

ET § 8–103(a) provides in pertinent part that:

“[A]ll claims against an estate of a decedent, whether due or to become due, absolute or contingent, liquidated or unliquidated, founded on contract, tort, or other legal basis, are forever barred against the estate, the personal representative, and the heirs and legatees, unless presented within the earlier of the following dates:

“(1) 6 months after the date of the decedent’s death; or

“(2) Two months after the personal representative mails or otherwise delivers to the creditor a copy of a notice in the form required by § 7–103 of this article or other written notice, notifying the creditor that his claim will be barred unless he presents the claim within 2 months from the mailing or other delivery of the notice.”

Kann v. Kann, 344 Md. 689, 714, 690 A.2d 509, 521 (1997).

CONCLUSIONS

From the foregoing, it is understood that all property of a decedent shall be subject to the estates of decedent’s law. Generally a decedent’s investment account is property that will be included in a decedent’s estate. In the case of those accounts held as joint accounts, the interest on the account will be vested with the joint owners.  All property which does not have any specific designations or is not specifically assigned to other persons will be part of the decedent’s estate.

Courts in equity may consider as done that which should have been done. When a person has complied with all requirements necessary for making a substantial change, courts may consider it as completed even if some formal requirements from the bank have not been completed. Here the son has every right to have his name considered as added to the account if the son could show that it was his father’s clear intention to make him joint owner in the account, and the failure to add the son was solely that of the bank.

The statute of limitation for the possible claims the son may have (negligence and Breach of Contract (third party beneficiary) is three years. Further any claims against the decedent’s estate should be raised within 6 months after the date of the decedent’s death or two months after the personal representative mails or otherwise delivers statutory notices, whichever is earlier.