Bank account of the ‘living’ dead

Mario’s father wanted to make things convenient. He opened a joint bank account with his junior as co-depositor. So that when he dies, Junior can simply withdraw the money from their joint account. The day came. Medical and funeral expenses needed to be paid. Junior could really use the rest of the money as well. Doting relatives published an obituary of Mario’s death. The bank manager read this in the papers. At the bank counter, Junior learned the account was frozen, until he could present an estate tax clearance from the BIR.

Junior could not get his hands on the account he co-maintained with his now dead father. He thought that the worst bank account is a joint bank account between the living and the dead. He is not alone in his predicament.

Banks are not interested in keeping this money. The culprit is Section 97 of the Tax Code, which requires that a BIR certificate that estate taxes have been paid be presented. Only then can banks allow withdrawal from the deceased depositor’s bank accounts, including joint accounts.

In fact, Section 97 also kills supposed simplicities that could be achieved by entering into survivorship agreements. These agreements between joint depositors allow the surviving depositor to gain full ownership of the bank account when the co-depositor dies.

A joint bank account is a co-ownership. In law, the shares of the co-owners are generally presumed equal. Thus, a joint account of two persons legally vests in the surviving depositor only 50 percent of the account, while one with a survivorship clause vests 100 percent ownership to the latter. Well, it doesn’t make withdrawal more efficient because banks are required to freeze them anyway without a tax clearance.

It is really ironic that the law allows for legitimate deductions from estate tax, like funeral expenses (up to five percent of estate) and the last medical expenses of the deceased (up to P500,000), but would not allow withdrawal of cash to pay for these when death comes. Estate taxes need to be paid to get the tax clearance, but one cannot withdraw from the account of the deceased to pay the tax. The banks seem to be left with an uncomfortable position of administering compassion at their own risk, if only to allow limited withdrawals of the grieving surviving depositor in urgent need.

An interesting scenario, and also a legal issue, is when the co-depositor depends on the deceased for support. The Family Code says the right to receive support and the money for such support cannot be levied upon on attachment or execution. This means that even if a creditor achieves victory in court, he cannot use the court order to seize money meant for support. Because that is like taking food right out of a person’s mouth. The Code also says the amount of support adjusts in keeping with the financial capacity of the family. So even decent cars count as support if this is how the family lives.

If the amount of support cannot be seized by a creditor, even with a court order, then it is with more reason that support cannot be denied by freezing the bank account of the surviving co-depositor. This is true especially in a joint account where 50 percent of the balance is already obtained by the surviving co- depositor. If the Family Code is not made to prevail over Section 97 of the Tax Code, the surviving depositor may be denied, for some time, his ability to pay for rent, tuition, transportation, clothes and medicine.

The way not to sweat this legal issue is to place the bank account entirely in the name of dependent and avoid the joint accounts altogether. When the dependents are not yet of age, accounts held in trust for the dependent will also be apt. Without prejudice to estate tax obligations, withdrawing everything before the death works, certainly.