Joint bank accounts can provide that the survivor of the joint owners is entitled to the balance in the account on the death of the other joint owner. But will this occur?
Where a parent names an adult child as the joint owner of a bank account, there are usually two reasons for doing so.
The parent might wish to make a gift of the money remaining in the joint account on their death. Alternatively, a joint account may only be created to pay bills. This means that the money in the account should form part of the deceased’s estate.
Where the deceased contributed all or most of the money to the joint account, Ontario courts will presume that the deceased did not intend to give a gift to the jointly named account holder. The Court will presume that the joint account is held by the survivor in trust for the deceased’s estate.
The Supreme Court of Canada has held that where the intention of the parent is not clear, it is up to the child to prove that the deceased parent intended to gift the balance of the account to the child. If the child cannot prove it was intended as a gift, the courts might find that the money in the account is part of the deceased’s estate.
Where the intention is unclear sometimes disputes over what the deceased intended could result in litigation between the beneficiaries and the surviving account holder, with potential significant delay and legal expenses.
The factors considered by the Courts when Courts try to decide what a parent intended at the time of the creation of the joint account include:
1. Conduct after the joint account was created
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3. The wording of the bank documents that created the joint account.
a. Did the creator understand the effect of a joint account?
b. Bank documents on their own are given little weight by the Court when trying to determine the intention of the parent.
4. Whose money was used to create the joint account
a. if the other person did not deposit their funds into the account, then possibly the owner of the funds may have been intended to remain with the parent.
b. If both the parent and the child contributed to the joint account it is more probable the ownership was likely intended to be truly “shared” or joint;
c. Who paid the taxes on interest earned from the money in the joint account.
d. did the parent understand the consequences of creating a joint account
Where someone objects the surviving joint owner (the child) might have to satisfy the Court that the parent intended the child to receive the balance left in the account on the death of the co-owner parent. If there is doubt about the deceased’s intention, the balance in the account will go to the deceased’s estate.
To avoid confusion and possible delay and costly court applications. a parent who creates a joint account should ensure that others (ie: people other than the child who is the joint owner) are aware of their intentions. Other family members, the parent’s lawyer, accountant, or other financial advisers should be told of their intentions. It is also advisable for the parent to put in writing what they intend by creating the joint account. A gift letter or some other formal documentation should be prepared, preferably by a lawyer and signed by the parent.
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.
