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Monday, January 4, 2016

Joint accounts: banks and lawyers give different answers

The problem of parents adding their adult kids to their accounts raises its head yet again. In this case, a beneficiary was given conflicting advice by the bank and the lawyer about the deceased parent's joint account. Who was right? Below are his note and my response:

"My Mother asked me to go to the bank with her and when I did it was for her to add my name to her joint account and I signed the papers. After her death the bank phoned me to come up there (6 hours away) and have my Mother's name taken off the account as they said the account now was mine, but her lawyer would not let me have it and said if I did he would not represent us then in finishing the estate. Since it was just finishing up I had no choice. Was this right?"

On the face of it, yes, I believe the lawyer was right. As a general rule, assets that belonged to a parent and later had a child's name added as a joint owner belong to the parent's estate. The bank was wrong to tell you that you could keep the account, and I suspect the bank was well aware of this. It is not possible that banks (or at least their legal departments) don't know the laws regarding inheritance of joint property. It's just easier for them to do it that way, and I believe that it won't change until the banks are forced by the courts to get up to date.

Having said all of that, there are a few facts missing from your question that might impact my response. General rules are ALWAYS shaped and amended to fit the facts of an individual case.

First of all, when you and your mother went to the bank to add your name, did the bank officer ask your mother why your name was being added? And if so, what did your mother say? This makes a difference because, as I mentioned, an asset like this where a child's name is added belongs to the parent's estate unless there is evidence provided by the parent that he or she intended for the child to inherit the asset (as opposed to adding the child's name to avoid probate or to get help with the banking). If the question was asked and answered and the banker made note of your mother's answer, that would make a difference.

If your mother told the banker that you are supposed to inherit the account to keep for yourself, then it should have been paid to you. Otherwise, it stays in the estate.

You also didn't say whether there was a will. In the old days, wills never mentioned joint bank accounts because the rule was that joint property was joint property, and therefore was not affected by a will. However, these days people will sometimes use their wills to confirm their intentions regarding inter-generational bank accounts. It's a way of providing the evidence I mentioned above.

Also, you didn't mention whether you are the only beneficiary of her estate. If you are the only beneficiary, you are going to inherit that account anyway. However, if you are not the only one, the account is to be shared among all the beneficiaries.

You should be glad that the lawyer you're working with knows his stuff. He probably just saved the estate from a lawsuit.



20 comments:

  1. Excellent and timely. I am currently dealing with a similar situation. TBC.

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  2. Regarding joint accounts lawyers do not always give clients the correct advise either. Case in point. My parents had a joint account with $120,000.00 in the account. They had a fight & I drove 4 hours to reach mom to get her to put a hold on the account as I knew he would remove the money. She refused to do it because the lawyer said he cannot take the money out without her permission. Mother would not budge believing the lawyer. One month later the money was gone, he gave it all away. My mother lost her home recently also because of bad advise from a lawyer refusing to believe me that my brother had stolen her property rights. Yes, I will take my brother to court but that will not get her home back, that will not get back all the money he stole from the rental income. Frankly, stealing homes & income from seniors is rampant & it should fall under CRIMINAL not CIVIL & the culprit should be charge by police. Not forcing people in a lengthy costly court battle. But that would mean we would have a true democracy which I will never live to see in Canada.

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    1. You're right, Trudy, lawyers don't always give correct advice. People in every profession, trade, and job do make mistakes. I always urge people to try to find a lawyer who specializes in their area of law if at all possible, because the depth of knowledge is just so much deeper. That helps to cut down on errors of judgement, though nothing is perfect.

      Lynne

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    2. For the life of me I CANNOT figure out how to start a post or ask a question! I see all these threads that must have been started somehow, but it must be VERY difficult to find, or I am blind.

      Thanks to anyone that can respond.

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    3. Hey there Lynne,
      Could you please tell me how to post a topic? I have been unable to find any such way
      Thanks very much!
      /J..
      mooglieman@hotmail.com

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    4. Actually, you were doing it correctly all along. But there is a delay before the comment is visible because I have to see it and click on it first. Sorry for the confusion, and please do post your comment!

      Lynne

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  3. Question even if he is not the only beneficiary why does the account have to be divided amongst all beneficiaries. As you said his mother may have made up her mind to leave it to him. There is usually a question of competency if there is a problem.

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    1. As I said in my post, if the mother gave evidence that she made up her mind to give it to him, then he would get the account. If not, it goes to the estate, and is therefore divided amongst all of the beneficiaries. This is why I was asking about whether the banker had taken notes. Those notes could be evidence either that she wanted him to inherit the account, or that she didn't. You're right that the question of competency could well arise.

      Lynne

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  4. My brother took power of attorney over our Mom when Dad died. Mom was 80 years old frail in poor health and blind. My brother moved Mom into his home and began charging Mom 100 a day to live there, he also paid his family members to sit with her. I come to find out he also did improvements to his home and paid this out of Mom's account. Is this legal ? I don't believe Mom understood what was going on .

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    1. This is a difficult one. It's true that your Mom probably didn't understand what was going on, but that is not a deciding factor simply because a POA is specifically designed for use when someone doesn't understand what's going on.

      As a general rule, no, it's not ok for someone acting under POA to charge renovations of his or her home to the account. However, if the renovations were done to more comfortably accommodate your Mom, there could be an argument for it. Is there someone who has a medical directive for your Mom? If so, that person is actually the one who has the right to decide where your Mom lives.

      As for the $100 a day, I just don't see how anyone could justify that. What on earth is he thinking? Even assuming any amount was ok, this amount is excessive.

      The general rule is that someone acting under POA is supposed to act in the best interests of the person he is looking after, not his own interests, and he is not supposed to benefit financially. These are the rules for all trustees. Unfortunately, the only way to stop him - assuming he won't stop upon being asked - is to involve the courts.

      He could be in quite a bit of legal trouble for draining the account. He may be ordered to pay it back, and the cost of the renos too, depending on what was done. He could also be removed from his appointment as POA.

      As I said, your only legal back-up is the courts. If you want to look into it further, find a lawyer with some experience in wills and estates to help you.

      Lynne

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  5. Hi Lynn,
    I'm in Manitoba and myself and my siblings are issues in my grandmother's will. My mom tragically passed a month and a half prior to my grandmother. Mom use to always say "God forbid the day baba passes, as it will be a uphill battle". Well she was right! My siblings and I would like to know what form/action through the courts to have my uncle (the executor) be forced to provide us with financial affairs and back-up that we have already requested through a lawyer but that he has not provided.?!
    Also, my grandmother had a joint account with her other daughter (who was P.O.A) and the wife of the executor.
    Thanks,
    Teresa

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    1. Hi Teresa,
      Assuming that you and your siblings are beneficiaries of your grandmother's will, and it sounds as if you are, then you are correct that you have a right to an accounting from the executor. As you have already requested an accounting and have been refused, the next step is to approach the courts and ask for an accounting. There is no form for this per se; you would have to start a lawsuit under the Trustee Act. See the Act at this link: http://www.canlii.org/en/mb/laws/stat/ccsm-c-t160/latest/ccsm-c-t160.html.

      This would be pretty difficult to do without a lawyer to help you, as there are tons of rules and regulations.

      The other option to consider is mediation. In your case, this would be the executor sitting down with the siblings (and a mediator, of course) to talk out the issues on an informal basis. This would be faster and way cheaper, if the executor would agree to it.

      Lynne

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  6. Hi Lynne,

    I just found your site and glad I did. I am POA for my Mom, however, I have an older brother who has taken it upon himself to manage my Mom's finances and put her money in joint accounts. I am furious and the result has split our family.
    He has said that by doing so, the government cannot take her money to pay for a retirement home if she has to go there. I say BS! I want to look into a trust fund for her. The result of all this is my 84 year old mom is worried, confused and distraught. The inheritance is written out in her will, if there is any left. We do not care about inheriting the money, we just want to protect what my Mom has right now until she is gone.
    Any help you can give may settle a raging feud. PS. I am in Ontario.

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    1. I can't comment on the issue of whether the Ontario government could take her money if she goes there, as I'm not familiar with their program. However, I can comment on the rest of it.

      You didn't say whether the POA is active. You are named, yes, but are you actually using it based on your mother's lack of capacity? I ask this question for two reasons.

      One is that if your mother still has capacity and her POA is not in effect, she has the right to agree to a joint account.

      The other is that if the POA is in effect, and your mother does not have capacity, you can step in and change the current arrangements. I don't usually advocate doing things that are going to cause bad feelings among family members but it appears that ship has already sailed.

      Your brother's reason for doing what he has done seems premature, given that your family doesn't know for sure that your mother is going to need a retirement home. There is quite a bit of risk for your Mom in the current arrangement. Your brother could, with no negative intentions at all, cause her to lose all of her money if he were to get divorced or be sued, or simply to allow his wife or kids access to the money.

      If the POA is active, you have an obligation to step in. If you don't, and the money ends up being lost, the family is going to blame you as POA, not your brother.

      This situation deserves more input than a simple blog post, so you might want to talk to a local lawyer about it.

      Lynne

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  7. Hi, very informative site. Thanks.
    Just wanted to ask a question for my 87 yr old mother. She lives in Toronto and has a condo which is her principle residence, and she has a house that she has rented out for the past 25 yrs. She obviously has always been very good with her money and she is damned if she is going to let the gov't take 40% when she dies. Her words.
    She is beside herself looking for ways to avoid paying capital gains, which will be significant. Her kids says there is no way around it.
    Are we right?
    By the way, my mother doesn't trust lawyers.

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    1. Perhaps your mother's distrust of lawyers - and by the way, you do know I am one, right? - is the reason she is so completely misinformed and believes wrong information like the government taking 40%.

      Lynne

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  8. Lynne, great post. My brother and I have joint POAs for our mother's health care and finance.
    My brother hold the documents and refuses to provide me with a copy.
    Recently, I found out he was added to my mom's accounts as joint and several. Mom is in a nursing home with dementia and when I ask him about her accounts etc he refuses to provide information and does not want to act upon POAs. My concern is, I found out he was borrowing money from her accounts for his own expenses and also had her sign over title to her home, even though he did not purchase it.(done prior to her dementia) I am a little concerned since he refuses to show me bank statements. What can I do to initiate the POAS.
    Ontario Canada

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  9. Lynne I had a joint account with a friend for 10 years we both could take or deposit money without the other need to sign ,my friend died and he didn't had any family here ,I took the money ,6 months later one sister in England become is estate ,she suing me for the money she wants all ,because the last deposits was from my friend, she has the right to this money?any advised,please

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  10. Looking for last minute advice as I go in a few hours with the RBC rep to convert my dad’s account into a joint account. They say it is the best way, but everywhere online says it’s not. If I am the only child, executor and sole beneficiary in his will and have POA property, he is widowed, is it OK to go the joint account way rather than just having signing rights? I want to manage his expenses for now, and this is supposed to simply things when he passes on. Any advice would be appreciated, thanks.

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    1. Sorry I didn't get to this in time for your meeting.

      The problem I have with you being put on as a joint account holder is this. You say you want access to manage the account. But what you're getting is ownership. You're using the wrong tool.

      You could get access and manage the accounts by using a power of attorney.

      The fact that you have no siblings helps in the sense that there won't be anyone to contest if you keep the account on the death of your father. However, there is risk to your father when he adds you as a joint owner. If you get divorced or are sued or other things go wrong, your joint ownership of the account means his accounts can be used to pay your liabilities.

      Bankers give banking advice. They are telling you what works for them. They aren't telling you the legal consequences because they aren't lawyers.

      Lynne

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