Punts v. Wilson, 137 S.W.3d 889 (Tex. App.—Texarkana 2004, no pet.).
Decedent opened several P.O.D. accounts and designated Beneficiary as
the person entitled to the funds upon his death. Decedent’s will left
the remainder of his estate in equal shares to Beneficiary and Friend.
Beneficiary was named as the independent executor of Decedent’s will.
After Decedent died, Beneficiary made withdrawals from the P.O.D.
accounts in excess of one-half of a million dollars. Beneficiary did not
include these accounts in the estate inventory. Friend sued Beneficiary
for breach of fiduciary duty and conversion claiming that Beneficiary’s
actions deprived Friend of one-half of the funds in the accounts. The
trial court granted Beneficiary’s motion for a summary judgment and
Friend appealed.
The appellate court affirmed. The court explained that although
Beneficiary owed fiduciary duties to Friend by virtue of being the
executor of Decedent’s estate, Beneficiary owed no duties to Friend with
respect to assets that are not includable in Decedent’s probate estate.
Decedent properly created the P.O.D. accounts and properly named
Beneficiary as the P.O.D. payee. The funds belonged to Beneficiary
immediately upon Decedent’s death and were not part of Decedent’s
probate estate. Prob. Code §§ 439(b) & 439A(b)(2). Consequently,
Beneficiary owed no duty to Friend with respect to these funds.
The court also rejected Friend’s attempt to use extrinsic evidence to
prove Decedent’s intent that Beneficiary and Friend share the funds
equally. Likewise, the court deemed it insignificant that Beneficiary
obtained checks payable to Beneficiary as the executor of Decedent’s
estate when he withdrew the funds. Following a long line of Texas cases,
the court explained that if the P.O.D. agreement is complete and
unambiguous, then parol evidence is inadmissible to vary, add to, or
contradict its term.
Moral: Clients must remember that multiple-party accounts such as P.O.D.
accounts, trust accounts, and joint accounts with survivorship rights
pass under the terms of the account contracts and not under their wills.
The estate planner should carefully questions each client about the
existence of multiple-party accounts, determine if they were created
correctly, and whether the client actually intends the property to pass
outside of the probate estate.