Joint Bank Accounts
The Supreme Court of Canada recently considered two cases involving joint holdings with children and the presumption of advancement. Pecore v. Pecore, [2007] 1 S.C.R. 795, 2007 SCC 17 and Madsen Estate v. Saylor, [2007] 1 S.C.R. 838, 2007 SCC 18 considered whether the presumption of advancement was applicable in our modern lives when there are gratuitous transfers from parents to their children. The Court concludes that the presumption of advancement ought to only apply to gratuitous transfers from parents to minor children. The presumption of resulting trust, therefore ought to be applied where the joint accounts or assets are held with adult children. It is then open for the transferee (the adult child) to show evidence regarding the parent’s intentions when the gift was made. The bank documents disclosing a right of survivorship will not by themselves assist the transferee in rebutting the presumption of a resulting trust.
If a parent is interested in establishing a joint account and intends that the fund pass to the child on death, the parent should be encouraged to execute a deed of gift even after the joint account was created. Alternatively, if the child is to hold that money in trust for the parent during his or her lifetime and then on the parent’s death hold it in trust for a group of beneficiaries or the estate, this should also be committed to in writing by both parties evidencing that the child agrees to act as trustee.
If the other joint owner is not a minor child or spouse, the presumption of advancement does not apply. Accordingly, if the intention is for the other owner to receive the balance of the bank account on death of the other person, it is imperative that a deed of gift be executed.
When an attorney presents the power of attorney, banks and credit unions often suggest that the bank accounts and investments could be put into joint names with the donor and the attorney. Attorneys should be aware that unless the Power of Attorney document expressly allows this, it is not the appropriate course of action, and that the attorney must not change the ownership of the accounts using the power of attorney document. Regrettably, most attorneys do not seek legal advice on the assumption of their duties as attorneys.
If you and your parent(s) are thinking of setting up jointly held assets for estate planning purposes or to make immediate gifts of property, you must evidence your intentions in writing to be sure that the transfers will have the intended effect. You and your parents should see a lawyer to properly document the parties’ intentions.