Joint bank accounts

The skeletons in the closet of the family of Chief Justice Renato Corona’s wife, Cristina, have been exposed in his impeachment trial.

She and her kin are involved in a suit before a trial court over the P34.7 million that the Manila city government paid in 2001 to the family-owned Basa-Guidote Enterprises Inc. for the expropriation of a parcel of land owned by the company. The bulk of the money—P32.6 million—was reportedly deposited in Corona’s bank accounts at Philippine Savings Bank in July 2011 then withdrawn on Dec. 12, 2011, the day he was impeached.

Corona’s lawyers said the amount was merely “safe kept” in his accounts pending the resolution of the case and were withdrawn to avoid its entanglement in his impeachment trial. They stressed that the money was not ill-gotten and that they will explain the circumstances behind its deposit and withdrawal in due time.

Stripped of the suspicions raised about the subject transaction, there is nothing unusual about married couples depositing in a spouse’s bank account the money that belongs to the other. Live-in couples, best of friends and business partners do that too. It is an expression of trust that the person in whose account (and signature) the money is deposited will not abscond with it.

Withdrawals

Touching and endearing as it may look, there are risks involved in a bank deposit arrangement where the right to make withdrawals from the account rests solely with the person in whose name the account was opened or registered. If anything untoward (knock on wood) happens to the registered depositor, the “co-owner” of the money deposited cannot go to the bank and claim his share. Only the deceased depositor’s heirs can, after complying with certain legal procedures, lay their hands on the deposit.

The joint or “and/or” account is the preferred arrangement if the money deposited is owned by different persons, whether natural or juridical, with their names clearly indicated in the account name. In this setup, the parties can state whether withdrawals can be made against the signature of one depositor or a combination of two or more, depending on their agreement. Through the joint signature requirement, the depositors can monitor the movement of funds and take the proper measures in case an authorized signatory oversteps his authority. But regardless of how an account is opened and maintained, withdrawing its proceeds if any depositor dies can be problematic.

Unknown to many, Sec. 97 of the National Internal Revenue Code (or Republic Act No. 8424) provides that “if a bank has knowledge of the death of a person, who maintained a bank deposit account alone, or jointly with another, it shall not allow any withdrawal from the said deposit account, unless the Commissioner [of Internal Revenue] has certified that the taxes imposed thereon … have been paid.”

Constraints

There is no room for discretion in case the bank has information, regardless of the manner it reached it, that a depositor has kicked the bucket. It should turn down any withdrawal from the account until the person who files a withdrawal slip for the account submits a certification from the Commissioner of the Bureau of Internal Revenue (not just any BIR officer) that all taxes due from the deceased depositor’s estate have been settled.

By way of consolation though, the law allows the administrator of the estate or any one of the heirs to withdraw from the account not more than P20,000 even without such certification on condition that the Commissioner authorizes him to do so. This liberality is not really comforting considering the bureaucratic mishmash the administrator or heir would have to go through to get that authorization.

However, it is common knowledge (although no bank would admit it) that some bank managers look the other way or feign ignorance about the death of a depositor and allow withdrawals from the deceased’s account if they personally know the person making the withdrawal and the account balance is not substantial. Contrary to popular perception, not all bankers have hearts of stone.

Survivorship

The prohibition against allowing withdrawals from the accounts of deceased depositors applies even if the joint depositors have earlier entered into an agreement that upon the death of any one of them, the remaining balance of the deposit shall accrue to the surviving depositor. This Survivorship Agreement, as it is called, considers the money deposited as owned in common whose benefits they can enjoy commensurate to their ownership proportion. Upon the demise of one of the joint depositors, the latter’s share in the bank account automatically becomes the property of the surviving depositor without need for further documentation.

The BIR has earlier ruled that provision “is valid and binding between the joint depositors but it has an effect of a gift or donation mortis causa [or arising from death] made by the deceased co-depositor during his lifetime but effective upon death.” It presumes that the deposit is owned in equal share by the depositors and that the deceased intended to donate 50 percent of the bank account to the surviving depositor. From the BIR’s point of view, that donation is in the nature of a transfer of property in contemplation of death which, under the Tax Code, should be taken into account in determining the value of the deceased’s estate for purposes of computing the taxes due from the estate.

Ergo, until the BIR Commissioner has certified that all such taxes have been paid, no withdrawals can be made from the account of the deceased depositor. Now, you understand why some people keep under wraps the death of their loved ones. The taxmen might pay them a visit, or the bank be put on notice about such death.

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