Joint accounts - will my daughter share with my son?

A reader has brought up a question about putting his daughter's name on his bank accounts as joint owners. This is always a hot topic at seminars and meetings, and I know that many of you want information on this as well, so I'm sharing my answer here.

Here is the question:

"I have added my daughter's name to the majority of my bank accounts and been told that they are marked 'with rights to survivorship'. We live in Ontario. I have asked my daughter to do whatever she sees fit with the money which includes sharing some with my son. My son is bad with money. Would I still need to put in my will that the money is her's to spend as she wants?"

There are a few things to consider here. First of all, if your daughter gets divorced or is sued or is influenced by her husband, or just wants to go on a spending spree, you can kiss your money goodbye. You have taken some steps to address things when you pass away, but you still have to live in the meantime. You have just placed your money at great risk.

Next, who is receiving the tax T-slips for the accounts? Have you just placed a tax increase on your daughter?

As for your daughter actually receiving the money as a joint owner after you pass away, yes, including a statement about it would help clarify your intentions. There is a question about inter-generational bank accounts such as yours being true joint ownership. The law changed in 2007, though banks have been very slow in coming to terms with the change. Currently the law states that when a parent owns an asset then adds a child's name to that asset, on the death of the parent the asset is frozen and held in trust for the parent's estate. This is to acknowledge that so many people put the kids' names on things during their home-made estate planning to avoid probate, or to allow the kids to help the parents with their banking.

Right now that new rule is being applied very unevenly across the country and it seems to me there is quite a bit of confusion in individual estates as to whether an inter-generational account is really meant to be joint. If you want it to be a true joint account so that your daughter inherits all of the money in the accounts for her own purposes, then mentioning it in your will is a good way to clear up that confusion.

That leads me to my next question. Are you sure that what you really want is for your daughter to inherit all of it? If so, why didn't you just give it to her outright and not leave it in joint accounts? You mention a son. Keep in mind that under your current arrangement, she doesn't have to give him a cent. He may be somewhat upset about this and even try to sue her over it, but legally the money will be hers if you confirm this in your will.

You mention that your son is bad with money. Are you thinking that your daughter will share with him and look after the money, in that way protecting him from blowing any money he might inherit? If so, you have chosen possibly the worst possible way to bring that about. You've created no legal right for him to inherit. Your will probably says to divide your estate between your kids, which will likely upset  your son when he realizes much of the estate is already in your sister's name and out of his reach. You've placed your daughter in the unpleasant role of having to be a parental figure to her brother, deciding whether he is fit to get an allowance and doling it out to him.

I don't know which role would be worse - the brother who has to beg for money, or the sister who has to decide what to give him.

Since you're making a will anyway, you might consider putting a share for your son into a simple trust using your will. You can prescribe the terms such as when he gets the money and in what amounts.

It doesn't really make sense to me that you'd make a will, but also make all of these accounts joint with your daughter unless you really do intend to cut your son out of those accounts and ensure that only your daughter gets them for her personal use. It feels as if you're using certain tools to achieve things they were never designed to achieve. My recommendation to you is that you find a really good wills lawyer and frankly discuss your goals with him or her.