Testamentary Dispositions and Joint Bank Accounts: An Important Lesson

August 28, 2015 Umair Estate & Trust, Estate Planning, Joint Accounts, Litigation Tags: , , , 0 Comments

In yesterday’s blog post, I discussed a recent Ontario Superior Court of Justice decision that shows the litigation that can arise between beneficiaries when the deceased dies intestate and uses joint bank accounts as a form of estate planning. Today, I would like to discuss a recent decision from the Ontario Court of Appeal where the deceased made a will, but subsequently deposited some of the bequeathed property into a joint bank account with a right of survivorship to his adult children.

In Foley (Re), 2015 ONCA 382, the deceased was survived by his son Donald and his daughter Dorothy. The deceased made a Will in 1990 where he made a specific bequest of “all Canada Savings Bonds registered in my name only at the time of my death” to Dorothy.

In 1996, the deceased established a joint bank account with a right of survivorship and named Donald and Dorothy as joint tenants of the account. The deceased’s financial advisor testified that he was trying to avoid the costs associated with probate, and the Court of Appeal noted that “he assured [the financial advisor] that his children would know how to divide the assets” in the joint account.

The deceased was the only contributor to the joint account. Unbeknownst to Donald and Dorothy, the deceased deposited the Canada Savings Bonds into the joint account. Upon his death, the Canada Savings Bonds were redeemed and distributed to Dorothy in accordance with the Will.

In addition to challenging three money transfers that the deceased made to Dorothy prior to his death, Donald argued that the deceased intended to gift the contents of the joint bank account equally between his children. In the alternative, Donald argued that the gift of the Canada Savings Bonds adeemed when the bonds were deposited into the joint bank account.

As I noted yesterday, there is a presumption of resulting trust when a parent makes a gratuitous transfer of property into a joint account with an adult child unless the child can rebut the presumption and prove that the parent intended to make a gift. In addition, under the principle of ademption, when a deceased makes a specific bequest but the subject property is not found among the deceased’s assets after death, the gift can fail or “adeem.”

At trial, the Honourable Madam Justice Mullins rejected Donald’s arguments, holding that he had failed to rebut the presumption of a resulting trust. The bonds were endorsed by a teller’s stamp prior to being deposited into the joint bank account. Justice Mullins held that the bonds became negotiable instruments because of the endorsement but the gift did not adeem because the bonds were still in the deceased’s name, as required by the terms of the bequest under the Will. The Court of Appeal upheld the trial judge’s findings and dismissed the appeal.

In yesterday’s post, I noted the importance of ensuring that your intentions are clear when using joint accounts as an estate planning tool. The Foley decision highlights the need to also ensure that joint accounts are used in a manner that is consistent with the rest of your estate plan. When you intend to make a specific bequest to a beneficiary under your will, great care should be taken to ensure that the bequeathed property is not placed in a joint bank account that is meant to pass outside the estate. The failure to do so may lead to confusion about your intentions and potential litigation between the beneficiaries of the estate.

Thank you for reading and have a great weekend.

Umair Abdul Qadir

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