Joint Accounts on Death: Avoiding Legal Uncertainty

By Kelly R. Mittelstadt

Joint bank accounts become more popular as our population ages. The Ontario Superior Court of Justice noted that[1], as parents live longer, and financial management becomes more complicated, an ageing parent may benefit from having a joint account with an adult child.

But what happens when the parent dies?

The Supreme Court of Canada, in Pecore [2], said that:

"Depending on the terms of the agreement between the bank and the two joint account holders, each may have the legal right to withdraw any or all funds from the accounts at any time and each may have a right of survivorship."

But what if the parent is the only one paying into a joint account she holds with his child?

If the parent dies, it is less clear that she intended to have the joint account go to the child rather than her estate.

Determining the deceased parent’s intentions will determine the ownership of the joint account. If she did not document her intentions, the Pecore case says, there are five areas where a court can seek her intentions:

  1. Bank Documents - If bank documents suggest the transferor’s specific intent, the court could consider them.
  2. Evidence Subsequent to the Transfer - An attorney’s notes from the drafting of a will might show an intention to omit joint accounts from the estate, perhaps showing that those accounts were intended to pass via the survivorship provision.
  3. Control and Use of Funds in the Account - The fact the joint holder controlled the account does not prove she had an interest in the account. A parent may set up a joint account just so the adult child can manage the account for the parent’s benefit. Conversely, just because the transferor parent controlled and used the funds during her life does not disprove an intention that the transferee acquire the joint account upon the transferor’s death.
  4. Granting of Power of Attorney - The granting of a power of attorney may allow the adult child to manage the parent’s financial affairs; so a subsequently adding the child as a joint account holder could mean something more; a gift of the account upon the parent’s death.
  5. Tax Treatment of Joint Accounts - If the transferor continues to pay taxes on the income earned in the joint accounts during her lifetime, it might prove the joint account should be an estate asset.

Ultimately, it will fall to estate planners to keep matters such as these from reaching the courts. It is critical that the testator document his intentions, to ensure any jointly held assets are dealt with according to his wishes. The question for the testator is, are these joints assets intended to form part of the estate, or are they a gift to the surviving joint account holder? Having a clear answer to this simple question can avoid litigation over these joint accounts.

1: McLear v McLear Estate, [2000] OJ No 2570 at para 40 [McLear].
2: Pecore v Pecore, [2007] 1 SCR 795 [Pecore].