Potential Estate Disputes: Parent-to-Adult Child Transfers to Joint Accounts

What happens to joint bank accounts and jointly owned property when one of the co-owners dies?  The answer is not entirely straightforward and depends on whether it is property, or whether it is money and other types of investments – and whether any money has been given or contributed by a parent who is one of the co-owners.  It’s an important issue – and one the estate administrators and trustees of the deceased’s estate need to understand in order to deal with the estate in accordance with the law.

Joint Ownership

Where land or property is owned by two or more people as ‘joint tenants’ in law, it will automatically pass to the survivor/s on the death of one of the co-owners.  One joint tenant cannot leave a share of the property to someone else under the terms of their Will.  However, if you own the property as ‘tenants in common’, each co-owner owns a distinguishable share in the property (see our article on Property Co-Ownership here). 

If you have a joint bank account, the general principle is that you are both ‘jointly and severally’ entitled to the contents.  This means you both have the legal right to access the account; and when one of you dies, the survivor is entitled to the balance – regardless of the terms of any Will.    However, the situation is not entirely straightforward where one account holder is a parent of the other – and this is where confusion and disputes are increasingly arising.

Estate Disputes over joint accounts

With an aging population, it is becoming increasingly common for elderly parents to transfer money into bank accounts which they hold jointly with an adult child.  Transfers of property from parents into the joint names of themselves and adult children (or outright transfers of property to children) are also on the rise.

Both are used to minimize the potential tax liabilities of the parents on death, and can help aging parents manage their money and assets more effectively.  However, issues can arise on death.

Contrary to what many people believe, money or property transferred by parents in this way does not automatically belong to the recipient – the law presumes that such money and property remain part of the parent’s estate.  This means that when a parent dies, the money and/or property will potentially form part of their estate – unless the adult child can prove that it was intended as a gift.

An important court ruling in 2007, Pecore v. Pecore, dealt particularly with the issue of joint bank and investment accounts where only one of the account holders deposits funds into the account.  In that case, a father transferred around a million dollars of assets in investment and bank accounts held jointly with his daughter.  The court held that the adult child bears the burden to rebut the presumption and to prove the parent intended to gift the asset to the adult child.

The court will consider various factors when ruling whether or not the money or other assets were a gift, including evidence of the transferor’s intention subsequent to the transfer; the wording of relevant documentation, and evidence of the transferor’s conduct after the transfer.  These principles have been reaffirmed in subsequent rulings and remain good law.

What does this mean?

If you are a parent who has transferred money, property or other assets into accounts held jointly with an adult child, it is important you and your child understand whether or not the transfer is intended as a gift.  Its status may become critical if one of you dies and can help ensure any estate disputes are resolved quickly.

If you are considering transferring money into a joint account owned with a child, consider ensuring there is clear documentary evidence stating whether or not transfer is a gift.  Making clear your intentions – and conveying this to the other account holder/s – can avoid the risk of future litigation.

It is also advisable to consider making a Will (or reviewing your existing Will) to ensure your interests, and those of your loved ones are protected.

How can we help?

If you have any concerns about a transfer of money or other assets to a joint account held with an adult child, contact the specialist Estate Litigation lawyers at Rogerson Law Group for expert, strategic advice.  We can advise you on the status and potential implications of the transfer to avoid a potential estate dispute.  Where necessary, we consult with our Cross Border team to ensure our clients have full, strategic advice.

Rogerson Law Group provides Estate Litigation services in the entire Greater Toronto Area including Toronto, Scarborough, Mississauga, Vaughan, Brampton, Richmond Hill, Etobicoke, and Barrie and surrounding areas with offices located in downtown Toronto, Barrie, and an associated office Ottawa.

Contact us now at enquiries@rogersonlaw.com

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