Legal Issues Surrounding the Creation of Joint Accounts – PART I
Joint accounts tend to be a common estate planning technique used by and recommended to clients by many allied professionals. Recently, in dealing with a litigious joint accounts matter, Ian and I considered some of the legal issues surrounding the creation of such accounts. We came up with a preliminary list of twelve things that we think should be kept in mind in establishing joint accounts.
Firstly, a joint account can be viewed as a gift as between the parties and this is a legal determination that needs to be made. The onus with respect to proving a gift is on the recipient of the gift after death to show that it was legitimate. There is a presumption at law that the gift is not valid and this must be overcome after death.
Secondly, the onus with regard to gifting needs to be considered in the context of a joint account as a gift given during one’s lifetime needs to be proven by the recipient of the gift and a gift after lifetime, given through a testamentary gifting process such as a Will, needs to be proven by the person that received the gift. There is no presumption that it was obtained by virtue of undue influence.
Thirdly, the presumption of undue influence is a legal concept that applies to joint accounts in particular, as it is presumed that when someone receives a joint account, at law, it can strongly be argued that the recipient of the gift must overcome any factual hurdles that indicate that the gift was received as a result of undue influence as between the two joint account holders.
Fourthly, and lastly for today, there is a presumption of resulting trust and the case law generally states that where someone holds a joint account, at law, the person who put the money into the account is the legal and beneficial owner of all of the money. Again, this presumption of law can be overcome by virtue of the facts and circumstances of the matter, and it may be that it was decided at the time of the account being established that it was to be split jointly.
We’ll discuss the next four legal issues to consider in creating joint accounts tomorrow.
All the best, Suzana and Ian.