Joint Bank Accounts and Titles - Fool-Proof or Foolish?
Many people think that by placing money, investments or real estate in joint names with someone that they are making a fool-proof gift to that person. This is far from the truth. Unless you do this properly, you could be causing legal confusion and litigation.
Presumption of Resulting Trust
If you place an investment, bank account or real estate in joint names, and all or substantially all of the money came from one of those people, then unless the other person is a spouse or child under the legal age, the law presumes it is not really a gift now or on death. Instead, the law presumes that this money or property will belong to the estate on the death of the donor. You can rebut that presumption in court, if you are fortunate, but you could very well lose also. Imagine how difficult, expensive, time consuming and stressful that will be. If this is your intent, make sure that you also make something in writing and sign it being absolutely clear as to what your intentions are. How can the money be used during your lifetime. What happens to the money after you die. Even then, there are subtleties in the law as to whether this is a gift of the right of survivorship during your lifetime, or an estate asset. You can prepare this type of declaration of intent yourself, but as most people have no training or skill in expressing their legal intentions and covering the elements needed under the law, it would be best to have your lawyer draft it.
Presumption of Advancement
On the other hand, if the other person on the account, investment or property is the person's spouse or child under the legal age, then the law presumes that this was a gift. However, it is not a rock-solid presumption. It can be rebutted to show otherwise. Again, if this is what you intend to do, make sure your intentions are set out in writing very clearly and signed.
Trying to Beat Probate Costs
I often hear from older clients that someone told them they should place their property in joint names with a child to "avoid probate costs". This can be a very bad idea that is nearly impossible to reverse completely, if at all. Here are some reasons why:
This article is far from a complete discussion of this issue. If you are planning on doing this, do not listen to your banker or a lay-person. It is not as fool-proof as you may be led to believe. Even if the bank form you sign indicates that the account is joint and carries the right of survivorship, the law says that is only to protect the bank so they are not dragged into litigation. It allows them to deal with the proceeds according to their form. The Supreme Court of Canada and also Courts of Appeal from various provinces have said that the legal ownership of these accounts and investments are still in question, even when the bank form says this. That is why you need to put your intentions in writing clearly and thoroughly, and strongly consider whether it is a good decision at all.
Notice: The information on this website is general in
nature only. It relates to Saskatchewan, Canada and may not be
applicable in your jurisdiction. It does not constitute legal
advice to you and no solicitor client relationship will be established.
You should seek specific legal advice regarding your circumstances
from a lawyer entitled to practise law in your jurisdiction.
www.rickcarlson.com | Sun, 27 May 2018 14:19:39 CDT1