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Sunday, May 11, 2014

Joint account found not to be the property of the surviving joint owner

Judging by the number of comments, questions, and email messages I receive that ask about joint accounts, the readers of this blog are very interested in knowing how joint accounts work when one joint owner dies. As I've blogged about before, inter-generational joint accounts held between a parent and child (or grandparent and grandchild, or aunt/uncle and niece/nephew) are no longer automatically considered to be true joint accounts in which the funds will belong to the survivor on the death of the older account holder.

The law now assumes that such an account is part of the deceased's estate, and that the other joint owner is a trustee of the account for the estate, until and unless it is established by way of evidence that the older account holder intended for the survivor to own the funds in the account. This assumption is called "the presumption of resulting trust" because the law presumes that a trust is the result of the account being held in joint names.

There's a reason for this major shift in the law. Too many seniors are adding the names of children, grandchildren, or nieces/nephews to joint accounts without understanding the consequences of that action. It's easy and cheap to do, and rarely does anyone even seriously consider how the law will affect this action. Of course, sometimes adding a name to an account isn't the senior's real choice, as it may be the result of elder financial abuse. In any event, the adding of joint names to bank accounts and other assets has created legal havoc in untold numbers of estates.

Recently in Ontario, the courts looked at the case of Lowe Estate v. Lowe. I found an excellent summary of the facts of the case, and its results, in an article by Ameena Sultan of the Toronto law firm of Whaley Estate Litigation. Click here to read the article.

The Lowe case was all about a joint account held between Mr. Lowe and his nephew. and whether the proceeds of the account should have been part of Mr. Lowe's estate when he passed away. The case was especially interesting because the court found that the joint account was not supposed to belong to the nephew when Mr. Lowe died, but neither was it part of the estate. Mr. Lowe had left instructions for his nephew to pay the funds to certain people, and the court said the funds were to go to those people. So the funds were paid to beneficiaries, but never passed through the hands of Mr. Lowe's executor.

A takeaway for everyone looking at joint accounts is that Mr. Lowe had left written instructions separate from his will regarding his account, and those instructions were enough to confirm that he never intended his nephew to own the funds in the joint account.

Another takeaway is that if you leave funds in a joint account with someone, on your death it may well take an expensive, lengthy court hearing to determine your intentions. There are better ways to accomplish your plans. Joint accounts are almost never the great idea people think they are. Talk to your estate planning lawyer to find out less expensive and more reliable methods of getting your estate to the people you want to benefit.

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