Joint Bank Accounts: Intention is Everything
The idea of a joint bank account seems simple enough. Two people own assets in a joint account. When one of them dies, the survivor automatically gets ownership of the assets. Straightforward, right?
Unfortunately, not in every case. For example, in a very common situation – where an aging parent creates a joint account with an adult child – courts have looked closely at the intention of the parent in creating the joint account. Was it for convenience primarily, or was it intended as a gift to the surviving adult child? Did the parent understand the consequences of setting up a joint account?
Such arrangements have been the source of much litigation in Canada, and the Supreme Court of Canada has been quite clear: unless the survivorship intention in setting up the accounts is clear, courts will presume that joint account assets are held by an adult child on a resulting trust for the parent’s estate, and distributed according to the parent’s will.
For parents who are considering a joint account arrangement with an adult child – and intend the adult child to inherit the assets through survivorship – they may want to take some steps to ensure that this intention is clear. This includes:
- Communicating their intention to any other adult children they have, and any other beneficiaries, to reduce the chance of a dispute
- Documenting the joint account and the intentions for survivorship directly in their will
- Granting the adult child joint account holder a power of attorney in addition to the joint account arrangement. This shows that the joint account was not created for convenience alone, as the adult child could manage the parent’s financial affairs under the power of attorney.
Here is a good summary of court rulings on this matter: http://www.lerners.ca/lernx/joint-accounts-is-the-surviving-owner-really-entitled-to-the-money/. And for an overview of some of the risks associated with joint accounts, this article outlines some factors to consider: https://nelligan.ca/article/joint-bank-accounts-are-they-a-good-idea/.
While joint accounts can serve many useful purposes, they should be created carefully, with advance thought and sound legal advice.
Thank you for reading … Have a great day.