Category: Joint Accounts

17 Jul

Joint Accounts: When a Sibling is the Surviving Account Holder

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In a recent Ontario decision, Tiedemann v Tiedemann, the court considered whether the deceased had intended to gift to his sister the balance of funds in a joint account held by the both of them.

The sister argued that her brother intended to gift to her the balance of the funds as he did not have a good relationship with his son. The son of the deceased, the sole beneficiary of his estate, contented the funds belonged to the deceased’s estate on the basis of a resulting trust. The court found as the deceased was the only contributor to the account, the sister had to rebut the presumption of a resulting trust and as she was neither his spouse nor his child, she derived no benefit from the presumption of advancement.

Referencing the Supreme Court of Canada decisions of Pecore v. Pecore and Madsen Estate v. Saylor, the court looked at the evidence to determine the deceased’s actual intention. The court found the testimony by the deceased’s lawyer and a bank employee indicated that the deceased was interested in providing his sister with the authority to manage his finances and had not intended to gift her funds.

Weighing the evidence, the court found on a balance of probabilities that the resulting trust had not been rebutted and the intention of the deceased was to have his sister assist with bill payments if he became incapable.

To learn more about joint accounts, listen to Episode HOESP #60  where Ian Hull and Suzana Popovic-Montag discuss Percore v Pecore or read the transcribed version.

Thanks for reading,

Diane Vieira

25 Jun

US Taxes – Don’t Pay Twice

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In “Will Planning for Canadian Residents with U.S. Connections”, presented at the 9th Annual Estates and Trusts Summit, Paula Ideias, Bryan McNulty and Beth Webel (PricewaterhouseCoopers LLP) provide a sobering summary of problems with cross-border joint tenancy assets:

For U.S. estate tax purposes, when there is a spousal joint tenancy and the surviving spouse is not a U.S. citizen, the entire value of jointly held property is included in the decedent’s gross estate unless the executor submits facts sufficient to show that the property was not acquired entirely with consideration furnished by the decedent, or was acquired by the decedent and the other joint owner by gift, bequest or inheritance.

Canadian income tax consequences should also not be ignored. If the joint tenancy is between spouses, the deemed disposition of the property at death will not occur until the death of the second spouse. This may result in foreign tax credit problems if U.S. estate tax is triggered on the first spouse’s death. If there is a gain on the property, it may be best to elect out of the spousal rollover at the time of the first spouse’s death.

[…]

As a result, joint ownership is not a recommended form of ownership for U.S. situs property or as a will substitute for property subject to U.S. estate and gift tax because the incidents of Canadian income tax and U.S. estate and gift tax may not apply at the same time or in the hands of the same taxpayer. In this case, it is very likely that double taxation will arise. Additionally, joint ownership may not allow the spouses to undertake effective will and estate planning for U.S. estate tax. (see pg. 4).

The planning process is becoming increasingly complex, particularly where there are cross-border assets involved. In almost any situation involving US assets, it may be worth obtaining specialist legal advice in the State in question.

Thanks for reading.

Sean Graham

25 May

Resulting Trust Reverberations

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Both of the recent Supreme Court of Canada joint account/resulting trust decisions of Pecore v. Pecore, [2007] SCC 17 and Madsen Estate v. Saylor, [2007] SCC 18 involved joint accounts between deceased and child.

It is worth considering whether the decisions will impact cases involving joint accounts between deceased and non-children. (And please note I’m not addressing the impact on situations involving children, which is considerable and needs much more analysis than a blog).

The SCC’s strong statements confirming the presumption of resulting trust do not necessarily change the law as it pertains to non-children situations. However, the rarified source of the decisions could help Estate Trustees asserting resulting trusts over joint accounts with non-children. Consider:

The presumption of resulting trust therefore alters the general practice that a plaintiff (who would be the party challenging the transfer in these cases) bears the legal burden in a civil case. Rather, the onus is on the transferee to rebut the presumption of resulting trust. (Pecore, para 25)

Of course, the presumption of resulting trust means that it will fall to the surviving joint account holder to prove that the transferor intended to gift the right of survivorship to whatever assets are left in the account to the survivor. Otherwise, the assets will be treated as part of the transferor’s estate to be distributed according to the transferor’s will. (Pecore, para 54)

Not really different from pre-existing caselaw, but the SCC rarely enters the realm of Estates and Trusts law. When it does, lawyers pay rapt and lasting attention. Even confirmation of pre-existing common law can have quite an effect.

No doubt every Estate Trustees claiming resulting trusts over joint accounts by a deceased with non-children will be referring to these cases.

Thanks for reading.

Sean Graham

15 May

Joint Accounts – Hull on Estate and Succession Planning Podcast #60

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Listen to "Joint Accounts"

Read the transcribed version of  "Joint Accounts"

During Hull on Estate and Succession Planning Podcast  Episode #60, Ian and Suzana discussed a recent case, Pecore v. Pecore, 2007 SCC 17, from the Supreme Court of Canada. This decision concerned the issue of jointly held accounts.

Ian and Suzana discussed the consequences of joint accounts for adult children, minor children and dependent adult children.

04 May

Decisions on the Difficult Issue of Joint Accounts

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The Supreme Court of Canada released decisions in Saylor v. Brooks ("Saylor") and Pecore v. Pecore ("Pecore") yesterday, which are seminal cases on the issue of joint accounts.

As many of the readers will know, joint accounts are a hotly debated topic in estate litigation. When an account is held jointly between two individuals, both hold an equal, undivided share. If one of the joint owners dies, the other is left with the entire interest in the account.

Previous decisions on the issue of joint accounts have varied but courts typically approached the issue by presuming that if the account was held jointly between a parent and a child, the parent intended to gift the money to the child (the presumption applied even if the child was an adult and financially independent). It was then up to the challenger to prove otherwise.

In Saylor and Pecore, the Supreme Court essentially reversed the presumption in the case of adult children.

The Supreme Court ruled that because it is very common for elderly parents to hold accounts jointly with adult children for banking purposes, the starting presumption should be in favour of including the funds in the parent’s estate. The adult child will then have the onus of proving that the parent intended to gift the funds to him or her.

In the case of minor children, the old presumption of a gift will still apply, based on the assumption that parents intend to support their minor children.

While the clarity of a final ruling on how to approach joint accounts will likely be welcomed, there may remain some uncertain as to the evidence necessary to rebut the presumption. And hence, more litigation to come.

Have a nice weekend,
Jason Allan

06 Feb

Joint Accounts and Common Law Presumptions

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Joint accounts are a common tool in estate planning. Where accounts are held by two individuals jointly, both hold an equal and undivided share. When one dies, their interest terminates, and the surviving joint owner is left with the entire account. This results in numerous benefits from an estate planning perspective. However, it often also results in numerous lawsuits. The latest issue of Law Times includes an article which considers the controversial subject of joint accounts.

In “Awaiting Certainty on Jointly Held Assets,” Christopher Guly considers the debate over how to adjudicate challenges to jointly held accounts. He examines two decisions of the Ontario Court of Appeal, Saylor v. Brooks and Pecore v. Pecore. Both were recently heard by the Supreme Court of Canada.

The facts in Saylor and Pecore are somewhat similar in that both involve challenges brought by beneficiaries to accounts that were jointly held between a Deceased and his daughter. In both cases, the beneficiaries argued that the Deceased did not intend for the surviving daughter to acquire the entire account and that the funds should be returned to the Deceased’s estate.

In considering the beneficiaries’ claims, the Court diverged from the historic reliance on presumptions. In the past, a transfer of money or property between strangers was presumed to be a loan, while a transfer between a father and his wife and/or children was a presumed gift. Of course, the presumptions only operated as starting points and were rebuttable.

In Saylor and Pecore, the Court ruled that it must first consider the totality of the evidence and determine the intention of the Deceased at the time the joint account was created. Only if intention cannot be clearly determined will the Court then turn to the presumptions.

Sounds simple? Well, as Guly points out by reference to discussions with practitioners, including Ian Hull, the decisions raise numerous concerns. Namely, what evidence do you use to prove intention? What if you do not have available evidence? How much evidence is necessary to avoid the presumption?

I will be interested in reading the Supreme Court’s answers to these difficult questions.

For more background information on legal issues surrounding joint accounts, check out Ian and Suzana’s previous blogs found in the "Joint Accounts" category on the blogpage.

Thanks for reading.

Jason 

22 Dec

Legal Issues Surrounding the Creation of Joint Accounts – PART III

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For our last blog before the Holiday Season, Ian and I wanted to mention the final four legal considerations to keep in mind when dealing with joint accounts.

Firstly, and in particular, mental capacity issues always need to be considered at the time that the joint account is established.

In addition, Powers of Attorney are often the source document behind the establishment of a joint account and the use and abuse of that document at the time that the joint account is established needs to always be considered. Another high-level abuse comes through the use of Internet banking, where one of the family members obtains the password of the parent and then simply proceeds to do his or her banking at will.

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21 Dec

Legal Issues Surrounding the Creation of Joint Accounts – PART II

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Carrying on from our blog yesterday, joint accounts raise a number of legal considerations. The following are four more to keep in mind.

When dealing with joint accounts, there is also a presumption of resulting trust that relates to statute law that needs to be considered. In Ontario, pursuant to the provisions of the Family Law Act, it is presumed that a joint account established by husband and wife is jointly and beneficially held essentially on a 50/50 basis.

Furthermore, there is a presumption of advancement that needs to be considered in the context of joint account because as between husband and wife, it is presumed that the account is jointly held. As between parent and child, it is presumed that the account was established on the basis that, on death, the funds would essentially advance to the child. Again, depending on the facts, this can be argued at law.

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20 Dec

Legal Issues Surrounding the Creation of Joint Accounts – PART I

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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.

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