Brokerage found not liable to non-customer in joint account dispute

The owner of a financial account may choose from a variety of designations and forms of ownership for the account. It may be solely-owned; it may be jointly owned with right of survivorship but no independent access during lifetime; it may be “either-or,” it may be “pay on death to …,” it may be “in trust for …” Each of these carries very different legal ramifications during the lifetime of the account holder and after his/her death.  If a solely-held account is changed by the account holder to be jointly held with someone else, to what extent can the disgruntled heir of the estate seek compensation from the corporate financial entity which holds the account and processed that paperwork? The  NJ Appellate Division decision in Wolens v. Morgan Stanley Smith Barney  sheds some light on this subject.

The Court explained, “As a general proposition, the case law in our state has not recognized that a financial institution owes a legal duty to injured third parties who are not their customers unless a statute, regulation or other codified provision imposed such a duty, or where a contractual or “special relationship” has been established between the non-customer third party and the financial institution.”

What happened in this case? The Plaintiff’s mother had owned investment account(s) in her name alone at Morgan Stanley Smith Barney (MSSB). The accounts made up most of her estate.  At some point, she presented MSSB with a written request to change the account’s title so it was jointly held with one of her three daughters. She passed away four months later. Another of her daughters learned about this after her mother died, when it was disclosed that this “non-probate asset” would not be passing through the probate estate and would not be shared with the people inheriting under the mother’s Last Will and Testament.

The dissatisfied daughter sued MSSB for honoring her mother’s request. The Court dismissed the action, finding that MSSB did not owe any legal duty to the plaintiff to protect her potential interest, because the plaintiff was not a customer of MSSB and MSSB had not established any contractual or special relationship. The Court emphasized that even if there had been wrongdoing on the part of the daughter whose name was added to the account, that would merely provide a possible cause of action against her in connection with the estate, and it would not establish a basis for liability on the part of MSSB, who had no relationship with potential heirs of their customer’s estate.

The Estate planning process involves looking carefully at all of your assets and how they are structured, to be sure that the Plan you think you have is the Plan you actually have.

Call us for advice on estate planning and elder care planning ……….

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