Joint accounts between parents and children spur estate litigation
By AdvocateDaily.com Staff
Kirsh, a partner with Schnurr Kirsh Oelbaum Tator LLP, says that while it may seem like an effective way to prepare in case of an emergency, the confusion over joint accounts is at the heart of a great deal of estate litigation in the province.
She says the main benefit of setting up a joint account with a child is that parents are able to transfer funds to a beneficiary without the property becoming subject to the 1.5-per-cent estate administration tax on a deceased’s assets.
Problems arise when the parent intended the property to be held for the benefit of other beneficiaries in addition to the joint account holder, or if other children object to a sibling taking ownership of the account by way of survivorship.
“The question is whether the parent wanted the child to have the money or if they intended it to be held for the benefit of all the children,” Kirsh says. “You can’t have it both ways, and a large amount of litigation is on that exact issue.”
There’s also nothing to stop an adult child from draining an account held jointly with a parent either before or after the elder’s death.
A landmark Supreme Court of Canada decision from 2007 held that a presumption of a resulting trust applies over assets transferred to joint accounts such that it is presumed that the joint account is held for the benefit of the parent (and then his or her estate). However, evidence can override the presumption.
“People have to weigh the benefit of saving 1.5 per cent on the estate administration tax, as opposed to what could happen after you die if there is a dispute about whether the intent was that the joint account go to the surviving joint owner or be held for the benefit of the estate."
For those with complicated or valuable assets, in particular, Kirsh says testators should invest in estate planning advice, allowing trained professionals to find other tax efficiencies in their affairs.