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.