The common understanding of joint ownership is that where two people own an asset jointly and one dies the survivor becomes the sole owner of the asset. This is certainly true among spouses, not necessarily with others.
It is common to have a parent appoint an adult child as a joint owner on a bank account. The important question at the time of creating joint ownership is what did the parent intend. Where they are making a gift to the child so that the child would have use of the money in the account? Was the child only entitled to receive the balance of money in the account on the death of the parent? Was the account created by the parent to assist in bill paying but with the intention that the balance remaining forms part of the estate of the parent on their death?
If the parent contributed all or most of the money in the account Ontario courts presume that the parent did not intend to give a gift to the child. The child is presumed to hold the money in trust for the parent’s estate to be distributed according to the will. If it was solely the parent who contributed the money the parent probably intended to remain the owner.
The child must rebut the presumption and demonstrate that the parent intended to give the money to the child and the money is theirs alone. If they cannot rebut this presumption or if there is doubt about the parent’s intention the balance in the account would go to the deceased parent’s estate. This is particularly true where there are other beneficiaries in the estate who are not named on the joint asset. And even more true where the other beneficiaries expected that they too would share in the proceeds.
The parent’s intention at the time of the creation of the joint account is what counts. The courts would ask “who had control and use of the funds” so that if the parent continued to control the money it might indicate an account of convenience and not a gift.
Wording on bank documents can be referred to if the account was joint with right of survivorship and there is evidence that the parent understood the effect of a joint account at the time it was created and intended that the money was also the property of the other joint account holder.
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Who paid the taxes on interest earned from the money in the joint account?
If there is some evidence that the parent understood the consequences of creating a joint account, it might help in determining that the parent intended to gift the balance in the account to the child.
To eliminate future problems it would be wise for the parent who created the joint account to confirm with others that the child is an owner. Lawyer, accountant, financial advisor, or family members would be important to tell. It is most important that the parent’s intentions be documented by a gift letter or at least some written evidence for later use.
All of the above are factors to be taken into account to avoid interest and penalties when an estate trustee decides that the joint asset is not part of the estate for probate purposes and fails to pay probate fees accordingly.
This article is not intended to be relied upon as legal advice but only to give the reader an overview of the law in Ontario. You need to consult your legal representative to determine the best procedure in your particular circumstances.
