The Joint Account Land Mine
By Ray Riddell QC
As parents age, it is common to open a joint bank account with one or more adult children. Some find it simply more convenient for the adult child to do the banking and pay the bills. There is no intent to gift the money to the adult child on death. Others do it for that very reason, to avoid probate fees. They intend that the child on the joint account should get the money in the account automatically on the parent’s death without having to go to Probate Court. Unfortunately, after the death of the parent, the parent’s intentions may be unclear and family squabbles can surface between brothers and sisters. Parents may say one thing to one child and give conflicting information to another.
The law has recently changed in Canada and no longer is it automatic that the survivor gets all the money in a joint account. Ian Jackson, a widower, opened a joint account at the TD with his daughter Susan and also gave her a power of attorney. Ian made a will appointing Susan the executrix of his estate. The bank documents for the joint account had a “right of survivorship”. Both Ian and Susan understood this meant the money would go to Susan on her Dad’s death. Ian put all the money into the account, controlled it and used it for his daily living. He paid all the taxes on the income from the account.
When her Dad died, Susan took all the money out of the account for herself. She did not include it as part of her Dad’s estate. Susan claimed that since she was the apple of her Dad’s eye, her Dad intended that she get the money. She said the bank documents were clear. Predictably, her brothers sued.
After many years and many court appearances, Susan was ordered to pay the money to the estate and share it with her brothers. The court said the bank documents were not clear and Susan did not convince the court that her Dad intended she have the money after his death. (The legal fees were probably more than the $185,000 they were fighting over.)
In a similar case, George Hardy put a million dollars into a joint bank account with his daughter Alice and also gave her power of attorney. George wrote to the bank to say the account was all his and that there was no gift to Alice. George controlled the account and used it for his daily living. He paid all the taxes on the income from the account. Alice could take money out but not without asking.
When George made his will, he told his lawyer that the joint bank account was not part of his estate. His will left his estate to Alice and her husband Mike. When George died
Alice took the million dollars out of the account for herself and did not include it in the estate. She claimed that her Dad wanted her to have the money. Mike divorced Alice soon after and claimed that the money in the joint account should be part of the estate and he was entitled to his half.
After years of Alice and Mike fighting, the Court looked at the lawyer’s evidence, the banking documents and Alice’s dependence on her Dad for money. Leaving the joint account out of the will was the key factor. It was decided that George intended to give all the money in the account to Alice.
If intention is not clear, each case depends on the facts. The Court looks at the evidence to find out (guess) what the parent intended. Generally money in a joint account does not automatically go to the survivor. It is now presumed that the money goes into the estate unless there is evidence to the contrary. Fighting in court is costly and causes permanent damage to families.
Joint accounts with a wife or husband cause fewer problems but a joint account with an adult child can be a land mine. Parents on a joint account with an adult child should state their intentions in writing. Make sure the banking documents are clear. Make notes at the time of opening the account and put a note on the bank file. Prepare a statement of intention with a lawyer or send a letter to the adult child. If you want the survivor to have all the money in the account, write it down and keep the note with your will. If you don’t want to have the money go to the adult child, then say so in writing.
Better still consult a lawyer if you want your wishes and intentions to be followed.
Ray Riddell QC is a resident of Woodmans Point, NB. He practiced law in Halifax, Nova Scotia for 30 years with particular focus in probate, property, labour law and civil litigation. He is presently on sabbatical.
Ray Riddell QC
As parents age, it is common to open a joint bank account with one or more adult children. Some find it simply more convenient for the adult child to do the banking and pay the bills. There is no intent to gift the money to the adult child on death. Others do it for that very reason, to avoid probate fees. They intend that the child on the joint account should get the money in the account automatically on the parent’s death without having to go to Probate Court. Unfortunately, after the death of the parent, the parent’s intentions may be unclear and family squabbles can surface between brothers and sisters. Parents may say one thing to one child and give conflicting information to another.
The law has recently changed in Canada and no longer is it automatic that the survivor gets all the money in a joint account. Ian Jackson, a widower, opened a joint account at the TD with his daughter Susan and also gave her a power of attorney. Ian made a will appointing Susan the executrix of his estate. The bank documents for the joint account had a “right of survivorship”. Both Ian and Susan understood this meant the money would go to Susan on her Dad’s death. Ian put all the money into the account, controlled it and used it for his daily living. He paid all the taxes on the income from the account.
When her Dad died, Susan took all the money out of the account for herself. She did not include it as part of her Dad’s estate. Susan claimed that since she was the apple of her Dad’s eye, her Dad intended that she get the money. She said the bank documents were clear. Predictably, her brothers sued.
After many years and many court appearances, Susan was ordered to pay the money to the estate and share it with her brothers. The court said the bank documents were not clear and Susan did not convince the court that her Dad intended she have the money after his death. (The legal fees were probably more than the $185,000 they were fighting over.)
In a similar case, George Hardy put a million dollars into a joint bank account with his daughter Alice and also gave her power of attorney. George wrote to the bank to say the account was all his and that there was no gift to Alice. George controlled the account and used it for his daily living. He paid all the taxes on the income from the account. Alice could take money out but not without asking.
When George made his will, he told his lawyer that the joint bank account was not part of his estate. His will left his estate to Alice and her husband Mike. When George died
Alice took the million dollars out of the account for herself and did not include it in the estate. She claimed that her Dad wanted her to have the money. Mike divorced Alice soon after and claimed that the money in the joint account should be part of the estate and he was entitled to his half.
After years of Alice and Mike fighting, the Court looked at the lawyer’s evidence, the banking documents and Alice’s dependence on her Dad for money. Leaving the joint account out of the will was the key factor. It was decided that George intended to give all the money in the account to Alice.
If intention is not clear, each case depends on the facts. The Court looks at the evidence to find out (guess) what the parent intended. Generally money in a joint account does not automatically go to the survivor. It is now presumed that the money goes into the estate unless there is evidence to the contrary. Fighting in court is costly and causes permanent damage to families.
Joint accounts with a wife or husband cause fewer problems but a joint account with an adult child can be a land mine. Parents on a joint account with an adult child should state their intentions in writing. Make sure the banking documents are clear. Make notes at the time of opening the account and put a note on the bank file. Prepare a statement of intention with a lawyer or send a letter to the adult child. If you want the survivor to have all the money in the account, write it down and keep the note with your will. If you don’t want to have the money go to the adult child, then say so in writing.
Better still consult a lawyer if you want your wishes and intentions to be followed.
Ray Riddell QC is a resident of Woodmans Point, NB. He practiced law in Halifax, Nova Scotia for 30 years with particular focus in probate, property, labour law and civil litigation. He is presently on sabbatical.
