Thursday, September 9, 2010

Ownership of Funds in a Joint Account

One of the quickest ways to collect money due on a judgment is to garnish a bank account. Problems arise, however, when the account is held by joint owners, but the judgment is only against one of the account holders. This situation often arises in the context of husband and wife.

Under Illinois law, there is a presumption that each owner of a joint account owns all funds in that account. In other words, there is a presumption that a deposit by one person into a joint account is essentially a gift to the other person which he can then use how he pleases. Therefore, a judgment creditor establishes a prima facie case for turnover when it shows that the judgment debtor is one owner of a joint account.

The burden then shifts to the debtor to prove what part of the funds, if any, belong solely to the non-debtor joint owner. Factors used in determining the ownership of funds in a joint account include: 1) control over the funds in the account; 2) contribution of funds by each party; 3) whether any contribution by one party constituted a gift to the others; 4) who paid taxes on the earnings from the account; and 5) the purpose for which the account was established.

The case law weighs heavily in favor of the judgment creditor. The first factor seems to be the most important. If both parties use the account for their mutual benefit, it does not really matter who put the money into the account. In order to overcome the presumption of donative intent, the debtor must satisfy at least a couple of the five factors above. They basically have to show exclusive control over the account.

This is a factual determination that can be shown through the use of bank statements, bank signature cards, canceled checks deposited into or drawn on the account, loan repayment coupons or other loan documents, payroll records, etc. Remember that the burden is on the debtor, so without strong documentary support, I would argue that they have not met their burden to overcome the creditor's presumption.

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