Joint Accounts: Is the Surviving Owner Really Entitled to the Money?

Joint bank accounts can provide that the survivor of the joint owners is entitled, by right of survivorship, to the balance left in the account upon the death of the other joint owner. But will this actually occur?

If you look at joint accounts created by a parent naming an adult child as the joint owner, there are two common purposes for these joint accounts. The joint account can be set up in order to give the remaining money to the child. The intention is to provide a “gift” to the child with the child receiving the balance of the money left in the joint account on the death of the parent. Alternatively, a joint account may be set up for the child to access the money in the joint account to assist the parent with paying bills, but with the intention that the balance in the account upon the parent's death would be distributed according to the parent's Will. The intention that the monies in the account form part of the parent's estate means that the account would be subject to a resulting trust in favour of the parent's estate.

Where the parent contributed all of, or the vast majority of, the money to the joint account, Ontario courts will presume that the parent did not intend to leave a gift of the balance in the account to the jointly named child upon their death. In other words, the Courts will presume that the balance in the joint account will be held by the child on a resulting trust for the parent's estate – the monies will form part of the estate and must be distributed according to the parent's Will.

According to the Supreme Court of Canada in the case of Pecore v. Pecore^[1], where the intention of the parent is not clear, it is up to the child to prove that the deceased parent intended to gift the balance of the account to the child. If the child cannot prove that the intention was to gift the balance to the children, the Courts will find that the balance left in the joint account forms part of the deceased parent's estate to be distributed according to the parent's Will (or pursuant to legislation if no Will deals with the asset). Where the intention is not clear, disputes over what the parent intended often results in protracted litigation between the Estate (or its beneficiaries) and the child, with significant legal expenses being incurred by all.

The factors considered by the Courts when Courts try to decide what a parent intended include:

1. Conduct after the joint account was created – although the Court seeks to determine the intention at the time the joint account was created, subsequent conduct by the joint owners may shed light on the original intention. Who had control and use of the funds in the joint account may show the original intention – if the parent, whose money was deposited into the joint account, continued to control the money after transferring it to the joint account, it may indicate that the account was created for convenience only and not intended to be a gift to the surviving child;
2. The wording of the bank documents that created the joint account. For example, is it clear that the account was joint with the right of survivorship and that the creator understood the effect of a joint account? Generally, however, the bank documents on their own are given little weight by the Court when trying to determine the intention of the parent;
3. Who owned the funds that were deposited into the joint account – if only the parent deposited their solely owned funds to the account, then the ownership of the funds may have been intended to remain with the parent by contrast to both the parent and the child contributed to the joint account where the ownership was likely intended to be truly “shared” or joint;
4. Was a power of attorney given to the jointly named owner (the child), which may suggest that the account was not set up for convenience as the jointly named owner could have accessed the account using the power of attorney; and,
5. Who paid the taxes on interest earned from the money in the joint account.

Other factors that may be considered include:

1. where the evidence establishes that the parent was aware of the consequences of creating a joint account (ie: perhaps they had prior experience with joint assets), this will weigh heavily in determining that the parent intended to gift the balance in the account to the child; and,
2. evidence of a close relationship between the co-owners may be considered by the Court when determining the intention of the parent who created the joint account.

As the onus rests on the surviving joint owner (the child) to satisfy the Court that the parent intended for the child to receive the balance left in the account on the death of the co-owner parent, if there is doubt of the intention, the balance in the account will go to the deceased parent's estate.

Therefore, to ensure the money in a joint account is distributed as desired, a parent who creates a joint account would be wise to ensure others (ie: people other than the child who is the joint owner) are aware of their intentions – this may include other family members, as well as the parent's lawyer and/or accountant, or other financial adviser. Failing to clearly set out the parent's intention (in writing) can result in expensive and protracted litigation and possibly the money going to someone other than to whom the parent desired.