Kentucky

Status of brokerage account on death - tenancy in common vs. joint account with right of survivorship and prenup: ESTATE OF CHARLES SPENCER V. SPENCER (COA 2/15/2008)

By Michael Stevens

ESTATE OF CHARLES SPENCER V. SPENCER
ESTATES:  Status of brokerage account on death - tenancy in common vs. joint account with right of survivorship and prenup 
2007-CA-000277
PUBLISHED: REVERSING AND REMANDING
PANEL:  THOMPSON PRESIDING; NICKELL, VANMETER CONCUR
COUNTY: MCCRACKEN
DATE RENDERED: 2/15/2008

Despite having signed a prenuptial agreement, the husband retitled his brokerage account in his and his wife's name after they married. After he died, the widow claimed that the account was a joint account that passed by survivorship. The executor of his estate, however, claimed that the prenuptial agreement controlled. The Court of Appeals held that the couple owned the account as tenants in common. Therefore, the estate was entitled to the deceased husband's one-half interest in the account. The widow also retained her one-half interest in the account.

Along the way, the court noted that under Kentucky common law, the conjunctive "and" in an account title creates a tenancy in common. This result is in opposition to the majority of states, in which "and" creates a tenancy by the entirety. The Kentucky legislature has deliberately avoided bringing us in line with that majority view. However, KRS 391.315 does address certain multiple party accounts and directs that those accounts do pass by law to the survivor. The Court of Appeals, however, held that a brokerage account was not subject to KRS 391.315. Thus, the Court applied common law to reach the result that the brokerage account in the case at bar was owned by the couple as tenants in common. All in all, the case provides a nice review of an important area of law given the increasing prevalence of non-probate assets.

Jim Worthington

Full post as published by Kentucky Cases on March 23, 2008 (boomark / email).