California Amends Multi-Party Accounts Law
August 13, 2012
Under existing California law (Probate Code § 5100 et seq., known as the California Multi-Party Accounts Law or CAMPAL), an account belongs to parties “in proportion to the net contributions  by each to the sums on deposit” unless there is evidence of a different intent . A multiple-party account includes a joint account, payable on death (P.O.D.) account, and a Totten trust account.
A 2003 court decision, Lee v. Yang (2003) 111 Cal.App.4th 481, addressed whether funds in a multiple-party account can be withdrawn by any party without regard to which party deposited the funds.
In that case the plaintiff Holden Lee sued his ex-fiancé, defendant Janet Yang, for recovery of his money that she withdrew from their joint account immediately after the engagement was broken off. Janet withdrew over $340,000 of comingled funds from the account and closed it, and Holden sued. The court, finding no agreement between the parties that restricted the amount that either accountholder could withdraw, held that Janet had no legal obligation to give an account to Holden or return the funds. The court relied in part on the legislative history to CAMPAL that referred to the federal gift tax rules, which treat as a gift for tax purposes the personal use by an accountholder of funds contributed by another accountholder regardless of the intent of the contributing party.
The dissenting opinion noted that Janet had no property right to Holden’s funds based on her contractual right to withdraw funds from the account. CAMPAL addresses only the relationship between the bank and the signatories to the account, essentially protecting the bank from liability over accountholder disputes. The opinion also noted that reference to the federal gift tax rules simply beg the question.
Following publication of Lee v. Yang, members of the California legislature expressed concerns that the decision undermined the intent of CAMPAL, which they claim preserved a depositor’s ownership of funds withdrawn from a joint account based on the depositor’s net contributions. They were also concerned that financial elder abuse is often committed when an older person allows another person, often a relative or another trusted individual, access to his or her account, only to be betrayed.
Two previous attempts to amend CAMPAL in 2005 and 2011 were unsuccessful. This year, AB 1624 was enacted and is expected to be signed by the Governor into law. The bill would specify that (except by agreement) if a party makes an “excess withdrawal” from an account, the other parties have an ownership interest in the withdrawal in proportion to their net contributions on deposit immediately following the excess withdrawal. An excess withdrawal is one that exceeds the accountholder’s net contribution on deposit immediately preceding the withdrawal.
The bill also provides that only a living party (or the party’s conservator, guardian, or agent) is permitted to make a claim to recover an ownership interest in an excess withdrawal, subject to a court’s discretion to reduce any recovery to reflect funds withdrawn and applied solely for the benefit of the claiming party. Also, the bill clarifies that withdrawal of funds eliminates a right of survivorship “to the extent of the withdrawing party’s net contribution to the account.” This change is consistent with the legislature’s view that ownership of account funds is not affected by their being commingled or by the parties’ contractual rights to withdraw.
Under CAMPAL, financial institutions are required to pay sums on multiple-party deposit accounts in accordance with the terms of the deposit agreement, but are not required to inquire as to the source of funds, how the funds would be applied for purposes of establishing net contributions, or limit withdrawals or any other use of an account based on the net contribution of any party, whether or not it has actual knowledge of each party’s contribution. These provisions are not substantively changed.
Alex Alanis was CBA’s lead lobbyist on AB 1624, which will be effective as of January 1, 2013.
 Net contribution is defined in Probate Code § 5134: (a) “Net contribution” of a party to an account as of any given time is the sum of all of the following:
(1) All deposits thereto made by or for the party, less all
withdrawals made by or for the party that have not been paid to or applied to the use of any other party.
(2) A pro rata share of any interest or dividends earned, whether or not included in the current balance.
(3) Any proceeds of deposit life insurance added to the account by reason of the death of the party whose net contribution is in question. [Remainder of section omitted]
 PC § 5301. Generally ,CAMPAL covers multiple party accounts of unrelated persons, and does not cover deposit accounts of partnerships, joint ventures, or other association for business purposes; an account controlled by an authorized agent or trustee, trust accounts, and an account for an estate of a ward, conservatee, or decedent. See PC § 5122. CAMPAL does not alter the presumption that the net contribution of accountholders who are married to each other is community property. PC § 5305(a).
The information contained in this CBA Regulatory Compliance Bulletin is not intended to constitute, and should not be received as, legal advice. Please consult with your counsel for more detailed information applicable to your institution.
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