Avoiding Probate Using Joint Investment Accounts with Rights of Survivorship1

When an individual passes away, there is usually a will and title to the individual's property devolves in
line with the legacies under the will. If there is no will, title to the deceased's assets devolves along lines
predetermined by law. In either case, any succession in legal title is subject to a formal confirmation
from the probate court. The process of obtaining the requisite probate grant is generally subject to
delay and riddled with uncertainty. For families looking to maintain a lifestyle dependent on a now
deceased breadwinner, this could lead to undesirable situations. As a result, more property owners,
usually breadwinners, actively seek to circumvent or sidestep the probate process. In Nigeria, joint
accounts are generally seen as a cure-all for this purpose. This brief considers the proper way of utilizing
joint accounts to avoid probate. References to accounts include investment accounts i.e. fixed deposit
accounts, stock broking accounts and mutual fund accounts.

A Signatory to an Account Cannot Bypass Probate

Banks and financial institutions generally offer the option to open joint accounts on their account
application forms. Clients typically expect that upon the death of one joint account holder, the title in
the funds would automatically devolve to the other joint account holder(s). However, this is usually not
the case because the forms only appoint signatories to the account. For example, Jones and Dean are
appointed as joint signatories to one account. If Jones dies, Dean will not obtain title to the underlying
funds in the account.

This rule applies even if the signature mandate on the account is that either Jones or Dean can withdraw
funds. In the latter situation, Dean may be entitled to withdraw funds even after Jones dies because the
signature mandate allows him to. However, in the absence of a parental relationship between Jones and
Dean, the withdrawn funds from the joint account could be viewed as being held by Dean in trust for
Jones' estate.

One way to avoid these issues is via the use of a joint account that bears a right of survivorship.

Joint Accounts with Rights of Survivorship

A joint account with rights of survivorship (JRTS) is one where the account holders hold the property
jointly (a 'joint tenancy') so that they are deemed to have the same interest in the underlying property.
It is distinguished from those where the property owners are deemed to have varying degrees of
interest in the underlying property. This latter form of ownership is called a tenancy in common. The use
of 'tenancy' in either term is to highlight that the account holders have an ownership interest in the
property.

The consequence of a joint tenancy in the account is that if an account holder dies, that holder's
ownership interest automatically passes to the other account holder(s), rather than to the deceased’s
estate or personal representatives. This is a trite principle of law and was reiterated in Chinweze v. Mazi
(1989) 1 SC (part 11) 33 where the court held that if one joint tenant dies, his interest would pass not to
his estate, but to the surviving joint tenants.

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Bukola Akinsulere, LL. B University of Lagos

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Creation of a Joint Account with Right of Survivorship

Legislation in some foreign jurisdictions allow the creation of joint accounts with right of survivorship by
merely tagging the account as one. For example, the 2010 Tennessee Code Title 45 (T.C.A. 45-2-703)
provides that the designation of an account as one with a right of survivorship, or substantially similar
language, is conclusive evidence in any action of the intentions of all named that title vests in the
survivor.

Unfortunately, there does not seem to be any statute establishing the process of creating a joint
tenancy under Nigerian law. Thus, its creation in Nigeria is governed by common law. (As an aside, the
Securities and Exchange Commission (SEC) seems to recognize this class of accounts. Rule 356 of the SEC
Consolidated Rules 2013 contains a definition of ‘Joint Tenants with Rights of Survivorship account’ as
‘one that allows the survivor to retain the account where one party dies.’

At common law, the creation of a joint tenancy with a right of survivorship requires that the following
conditions are fulfilled:

▪ The account holders must derive title (or ownership) from the same instrument -Unity of Title
▪ The account holders must derive title at the same time - Unity of Time
▪ The account holders must have equal interest for the same duration in the property - Unity of
Interest
▪ Each account holder should have a right to possession of the entire property - Unity of
Possession

These are generally referred to as the Four Unities. An account that conforms to these Unities would be
deemed to bear a right of survivorship. The funds in that account would pass to a surviving account
holder if one predeceases the other.

A practical example is given below.

Tolu has some spare funds that she would like to invest. Her preferred investment option is to place the
money in a mutual fund but she wants her sister, Ayo, to have immediate access to the funds (plus
interest) if she dies. She has decided that a joint account with rights of survivorship is the best route to
do this. To achieve Unity of Title, the account has to be opened in Tolu and Ayo's name. If the mutual
fund provider issues an investment certificate as proof of ownership, the certificate must bear both Tolu
and Ayo's names. This would show that they are both entitled to the investment funds.

In compliance with the Unity of Time, the dual title must be created at the same time. If the account was
already in existence in Tolu's name and she consequently deposits funds in both she and Ayo's names,
there will be no joint tenancy and consequently no rights of survivorship. Title did not vest at the same
time.

If at the time of creating the account, Ayo and Tolu instruct the company that the funds will be held 'in
equal shares' or according to a sharing formula, Unity of Interest will not be satisfied. The latter requires
the interest of the account holders to be equal in duration and nature.

With Unity of Possession, the mandate to the account must allow either Tolu or Ayo to withdraw the
funds. This is because in a joint tenancy, each joint tenant is entitled to possession (but not exclusively)
of the property.

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Therefore, if a joint account meets the requirements of the Four Unities as highlighted above, then title
in the funds will pass automatically to Ayo if Tolu passes away. Due to the largely untested nature of this
process in Nigerian law, financial institutions that offer joint accounts with rights of survivorship usually
require that clients execute documents detailing their intentions.

It is pertinent to note the disadvantages of a joint account with rights of survivorship. By creating this
account, any of the holders will have access to the funds without the need to obtain the consent of the
other holders. This could lead to situations where one account holder deals with the property in a
manner outside the other holder(s) interests. There is also the possibility that one of the joint tenants,
being liable for a debt, opens the jointly held property up to his/her creditors as a source of repayment
of his loan. A living trust could be a better alternative.