Canadian Estate Planning Tip: Watch out for Joint Bank Accounts

After the loss of a spouse, an older parent may rely on a grown-up child to look after his or her routine banking chores. To make it is as easy as possible for the child, the parent may change a bank account that’s in his or her name alone into a joint account with the child. This simple arrangement, called a joint account of convenience, can work well while the parent is alive, but what happens to the money in that joint account when the parent dies?

Typically, the money in such a joint account would pass to the surviving joint account holder by a legal principle called the “right of survivorship.” It would go to the adult child, not to those named as beneficiaries in the parent’s will. However, two cases from the Supreme Court of Canada recently made it clear that things are not always that simple.

In Pecore v. Pecore a daughter became the joint owner of her Dad’s bank account, worth about $1 million. The same thing happened in Madsen Estate v. Saylor; there the bank account was worth about $185,000.

When the Dads died, each daughter said all the money was hers because it was a joint account. Also, their lawyers said, the “presumption of advancement” applied — when assets are transferred from a parent to a child the law assumes it is a gift unless proven otherwise.

As you can imagine, other members of each family went to court to prove otherwise. Their lawyers argued a competing legal principle called the “presumption of resulting trust.” This principle says that when assets are transferred to another without clear intention of a gift, the assets are held in trust for the estate of the deceased.

The Supreme Court of Canada decided that when parents make accounts joint with adult children the presumption of resulting trust applies. That means the money will go to the heirs of the deceased unless the adult child can show that the parent clearly intended to gift the account to the child. In Pecore v. Pecore, the court found evidence of intent to gift and the daughter kept the money. In Madsen Estate v. Saylor they did not, so the money went to the heirs under the will.

The lesson is obvious. If you wish to make an adult child a joint account holder such that he or she is entitled to all the funds in a certain account, leave a letter making your intentions clear. Otherwise, your legacy to your family will likely include a lawsuit over that account.

About Tom Carter, BA, MA, LLB, operated a private law practice specializing in wills and estates, incapacity planning, and adult guardianship and trusteeship. He now teaches law at Grant MacEwan University in Edmonton, Alberta, and is the author of several titles available in Self-Counsel Press’ Web shop: Living Wills Kit, Write Your Legal Will in 3 Easy Steps, and So You’ve Been Appointed Executor.
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14 thoughts on “Canadian Estate Planning Tip: Watch out for Joint Bank Accounts

  1. Joint account may seem to be one thing in principle but there are two kinds of joint accounts , one being 'and' the other being 'or'.
    The 'or' account gives full rights to both parties involved.Either or, persons involved can close the account or withdraw money upon there own behalf.Am I right or wrong , this is what I have been told.

    1. Agents would be some one not licensed by the law society representing the individual . In Ontario, Paralegals have recently been licensed to provide legal services . Paralegals licensed under the law society would not be considered agents but rather legal representatives .

      Good article.

  2. Just purchased the “Last Will and Testament- Living Will (3 Steps). Looking for insight on whether this is a binding document “as is” or should we take this to be notorized by a Lawyer or someone of this nature. The document information states that this only needs to be witnessed by two parties…but would this be binding?????

  3. Since this was a joint account can either person take out money from the account? If so what happens if one of the partys takes out the money and then they die?

  4. i've been waiting over 2 months to hear back from the banks estate dept, is this normal? i've called the branch but they cant seem to give me any answers

  5. My brother talked my parents into looking after their banking and accounts for their convenience. In truth, he was planning to use their assets for his own needs/wants. He also talked them into co-signing on a loan for $250K which he defaulted on and my parents ended up having to pay out. He doesn't work, simply leaches off my parents. He has made 'rules' that I, as a daughter, am not allowed to visit my parents, and has also restricted other extended family from seeing them. I feel this is obviously a case of “Senior Financial Abuse” but because my parents are incompetent, he has them completely under his control. It is not worth upsetting him and having to deal with his tantrums, so they simply comply with his every whim.
    My mom died last year, and my father is not well. There was 2 million in the joint account under my brother and my father's names. I have gone to agencies to report this as abuse, but am told that I must foot the bill for lawyer fees. I want to make certain that I am going to win before I fork out a bunch of money and I don't want to have to wait years to be reimbursed. It would be fair if the 2 million was divided between the surviving siblings, which was what my parents originally wanted before Tim brainwashes them. Any advice?

    1. Tom Carter says at the end of his article \”your legacy to your family will likely include a lawsuit over that account.\” and that appears to be the situation you are describing. If the monies involved are large (as you indicate) and you cannot afford a lawyer's fees, your remaining option is probably one of retaining a lawyer who will work for a percentage of whatever he can achieve in terms of division of the estate. Richard DayPublisherSelf-Counsel Press

  6. These posts are very informative so I thank everyone for that. I just want to make sure I understand correctly…….my parents are in their 90's and they have sold their house and live in a seniors complex. They now have no assets that need to be sold once they pass…..all their money ($400K) is simply sitting in their bank account. They have a will that is pretty straight forward in that their money once they die should be split equally between their 3 children…..I am the executor of the will. They have since discussed something else with us…..to make things even more easy they want to put me joint on their bank account…..so when they die I can simply walk into their bank and withdraw the money and split with my brother and sister as per their wishes…..no probate or whatever other red tape one has to go through. Am I missing something or is this as simple as it sounds?

    1. Yes, it can be that simple. Presumably they have no income for CRA to tax, and so no active tax account to close. One key issue: if you are jointly on their account, don't mix any personal money with it (addition or subtraction). That is the one area in which sibling court cases seem to have arisen. Richard Day

      1. Thank you Richard…..as for income….my Dad receives a company pension each month and then there is the CPP and OHS….that's about it. As for mixing personal money with theirs……that definitely will not happen.

  7. Sounds good. When he passes you should contact CRA to check if they have an open tax account in his name. If they do, a death certificate copy is probably all that they will want. Richard DayPublisher

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