You may be surprised to learn that the answer is ‘not always’. This is especially the case when the joint owners of a bank or investment account are a parent and an adult child.
At my law office in the Kanata-Stittsville area of Ottawa, I met with Sharon. Her widowed mother had recently passed away after a brief illness. Her mother’s Will divided the estate equally between Sharon and her brother, Bill.
Unfortunately, a point of contention had arisen between the siblings. At issue were two bank accounts held jointly by Sharon and her mother. Bill was adamant that these two bank accounts should be treated as part of their mother’s estate. Sharon, on the other hand, claimed that because the bank accounts were held jointly, they automatically belonged to Sharon after their mother’s death.
As I explained to Sharon, jointly-held accounts could be considered part of their mother’s estate and that rather being the sole owner of those accounts, Sharon may be considered as to be holding the accounts as a resulting trust.
What is a resulting trust?
If someone transfers property to someone else for little or no value, the law presumes that the recipient holds the property in trust for the original owner or ‘transferor’. So, if Sharon’s mother, as sole owner of the bank accounts, contributed all the money to the accounts, the presumption would be that Sharon holds the accounts for the benefit of her mother. If a resulting trust exists, the money in the joint accounts are assets of her mother’s estate and are not Sharon’s.
Is there anything I can do about this?
As I explained to Sharon, presumptions in the law are just that, presumptions. This means that they can be rebutted (or shown to be false). To do so, Sharon would have to provide evidence of her mother’s intention when she transferred the two accounts to their joint names. Did mom intend the accounts as gifts to Sharon upon her death? Or, were the accounts made joint to make it easier for Sharon to pay mom’s bills?
I cautioned Sharon that this presumption can apply to transfers made while her mother was alive. If Sharon made withdrawals from the accounts for her own use, she could be ordered to pay this money back. However, if her mother knew of the withdrawals and made no objections or in fact authorized her to make the withdrawals, they could be deemed to be gifts.
Caution for parents
If you are a parent and have transferred, or are considering transferring, any assets into joint names with your child, call 613.836.9915 or email [email protected] to make an appointment to meet with me at my Ottawa law office. We will review the risks and possible consequences of changing assets to joint ownership or of assets that you hold jointly with a child (or anyone else). We will also review how to properly document your intentions so that your wishes are carried out and your estate avoids or curtails the potential for costly litigation after your death.
Reproduction of this blog is permitted if the author is credited. If you have questions or if you would like more information, please call us at 613 836-9915. This blog is not intended to be legal advice but contains general information. Please consult a lawyer or other professional to determine how the information in this blog might apply to you.
Blog posts pre-dated December 1, 2015 were originally published under Neff Law Office Professional Corporation.
