Over the past six months, I receive more and more calls about cases involving joint bank accounts between a parent and an adult child (when the parent passed away), most of which involving disputes raised by other adult children of the parent who passes.

Joint bank accounts is an increasingly popular tool used by elderly parents (on the advice of financial planners, typically) for estate planning. The goal: the money in the joint account will not fall into the parents estate and, therefore, will not be subject to estate administration tax and not be available to the other beneficiaries under the last will and testament. The intention is for the surviving adult child to receive the proceeds remaining at death as a gift.  The intention, however, may not be achieved, but rather litigation can ensue.

Parents be smart when using joint bank accounts (by adding an adult child, or someone else, to your joint account, which has a right of survivorship to the other person).

The law: there is a presumption of resulting trust when a parent makes a gratuitous transfer of property into a joint account with an adult child. This effectively means: the adult child may be found to be holding the bank account proceeds in trust for the parents estate, unless the child can rebut the presumption by proving that the parent intended to gift the proceeds. This can be a challenging onus for the child to prove, in Court, and often leads to acrimonious and very costly litigation for the adult child (typically with other children of the deceased parent, or beneficiaries under the parents last will and testament). The important case is Pecore v. Pecore (2007, Supreme Court of Canada), if you are so inclined.

Recent cases where litigation has been caused, illustrating the very challenging on the adult child to try to rebut the presumption and prove there was an intention of gift by the parent:

Johnson v. Johnson Estate (2015, Ontario)

Foley (Re) (2015, Ontario Court of Appeal)

Tip: if you, as a parent, intend to use a joint bank account with an adult child (by placing the child on your account), for estate planning or otherwise, ensure that your intention is very clearly ascertainable, such as in your last will and testament, by a written declaration of gift and other means, which your qualified lawyer can help you achieve.

If you do not do so, your joint account may unintentionally fall into your estate, defeating your intention and estate plan, create confusion for those you leave behind and,  as often happens, leave a legacy of costly and protracted litigation for your family members. This would likely be a far worse outcome and potential savings to you than you intended to achieve by doing this in the first place. This can be done, but must be done correctly.

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