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Sunday, August 29, 2010

Joint or not joint - that is the question

It used to be, not so long ago, that if an asset was held in joint names with a right of survivorship, then the asset automatically went to the surviving joint owner when one of them passed away. Though this is still the general rule, it has been modified quite a bit over the last few years for assets that are held jointly between two generations.

In other words, the rules have changed for inter-generational joint ownership. When an elderly parent and his or her child own a joint bank account, joint investment account or joint real estate, there is no longer an assumption that it's a "real" joint asset, especially if it was first owned by the parent and the child's name was added later. Now there is a question that must be answered: did the parent really intend for the child to own this asset on the parent's death? Or was it only put into joint names for convenience?

"Convenience" covers a lot of possibilities, but the most common are bank accounts that are made joint so that the child can help the parent with banking, and real estate that is put into joint names to avoid probate. The arrangement was made not so that the parent could give the child the asset, but so that the child could help out at present and give the asset back when the parent died. Though the steps were taken by the parent with the intention of making things simpler, they often have exactly the opposite effect. Disputes break out among the children. The estate is delayed. Legal fees eat up the children's inheritance.

The main problem is that if one child gets to keep the house or bank account, the other children are never really sure whether the parent wanted things that way, or whether the child with the asset took advantage of the parent.

These days, thanks mostly to the shamefully large number of elder financial abuse cases, if you make an asset joint with one of your children, you have to leave some clear evidence of your intention with respect to the right of survivorship. You have to leave evidence of whether the child is supposed to own the asset when you're gone, or whether the child is simply named on the asset for convenience. This, says the Supreme Court of Canada, may be the deciding factor in who gets to keep the asset and who doesn't.

So how do you leave clear evidence? What exactly does that mean? Here are some ideas for making sure that your executor, your children and anyone else involved in your estate know what your intentions were for that bank account or house:

1. You can use your Will (which normally would not address jointly owned property) to confirm that an account that is joint is actually intended to go to the other joint owner on your death.

2. You can have your lawyer prepare a short trust document known as a "bare trust" for the joint asset, which basically confirms that the jointly owned asset is only held that way for convenience and the joint owner doesn't get to keep it.

3. During your estate-planning session with your lawyer, make your instructions about the account clear so that the lawyer can keep notes about your intentions, and draft the Will accordingly.

4. Prepare an Enduring Power of Attorney that will allow your children to help you look after your financial affairs without you having to put assets in their names.

5. If you put your child's name on a bank account or investment, explain to the bank personnel why you are making this change, so that the banker can include some notes about your intentions.

Given the number of times these joint accounts have caused unbelievable trouble, delays and disputes on an estate, it's surprising that anyone actually puts their child's name on their accounts anymore. I suppose it's a testament to optimism that nobody thinks it will happen to them.


  1. This comment has been removed by the author.

    1. That sounds like a truly painful experience for you. I hope others learn from reading cases like yours.


  2. This comment has been removed by the author.

    1. You're very welcome and thank YOU for the update and the good news. I agree that skilled, compassionate, experienced lawyers are worth the money. I know the firm you mention, and they are really excellent. I'm so very glad they are helping you. Hang in there :)


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