Home-made estate plan claims another victim

Home-made estate planning claims yet another victim. In this case, a son who believes he is entitled to keep a GIC to which his mother had added him as a joint owner is not likely to receive the GIC he says his mother wanted him to have. Here is his question, followed by my answer.

"My mother put my name on her GIC approximately 1 year prior to her death, saying that the GIC, which is about 25% of her estate, would be for my own use. This was an extra thank you for the time and energy put forth by me (and my wife) over the last 12 years. I was my mother's care giver. Both my brother and I are Executors. He lives in the other side of the country and has for over 35 years. Due to him being an Executor and living so far away, he hired a lawyer to act on his behalf. This lawyer says I have no rights to the jointly held GIC and must turn it in.  I do know there is a law with regard to this scenario, but is it in pure stone? I understand there would be some times when this might be necessary, but when my mother jointed them with me, she had the knowledge that they would become mine should anything happen to her. Obviously neither of us knew about this law or other steps could have been taken to ensure the outcome of her actual wishes."

I can't even tell you how common this is. All over the country, parents are adding their children to their accounts, investments and real estate. And as those parents pass away, the children are being disappointed and pitted against each other to fight over the assets.

And to think that five minutes with an estate lawyer could have prevented the whole thing. If only people realized that taking steps that affect your children's legal rights without talking to a lawyer is simply a bad idea. The kick of it is that the parents generally don't even know they've left a mess behind for their kids to fight over.

The law in Canada says that when an asset is jointly owned between a parent and child (or other inter-generational arrangement such as grandparent and grandchild) and the money originally belonged to the older person, on the death of that older person the asset goes back to the estate.

If you are the parent in a situation like this and you want your child to receive the joint asset on your death, simply adding the child as a joint owner isn't going to be enough. You must also leave written instructions that the joint asset is actually intended to go to that child. The written instructions should be made around the same time you made the asset joint.

The son who wrote me this note might contact the banker who took the mother's instructions to put the asset in joint names. If the banker happened to ask the mother about her intentions, and happened to record them, that would go a long way to establishing what the mother intended for this GIC. Most banks don't keep paper files these days, but they all have customer management software that allows for  notes to be kept. You just might luck out.

If  you are a parent made the asset joint some time ago, you can still salvage the situation by  making a will that confirms that you want the joint asset to go to that child for his or her sole use. The son who wrote to me should double-check his mother's will to see if she says anything about the GIC in her will.

Once you pass away, it's too late for the child to do anything about it. It doesn't matter what the child says about the parent's intentions, even in cases like this one where there is a perfectly reasonable explanation for the child to receive extra funds.

I really feel badly for the thousands of people who have put themselves and their children in this situation. An estate planning lawyer could have given you some advice on how to record your intentions regarding the joint asset, and if it was already in joint names, could have advised you on how to set up your will to carry out your intentions.

When parents open joint accounts with adult kids, others may pay the price

I'm always disappointed when I see that parents continue to put money into joint accounts with their children, when they don't intend for that child to own the money. It causes so many problems, lawsuits, delays, expense and family upset that it's simply a terrible idea.

The parents create these legally impossible situations for the children left behind. The children consult lawyers, battle lines are drawn and the family is often completely destroyed. All because it seemed "easier and cheaper" to use a joint bank account rather than a trust or a power of attorney.

This reader sent me in a question that arises out of a parent doing exactly the wrong thing, which was leaving money in a joint account with one person when she actually intended for someone else to have the money, followed by a daughter who apparently also did the wrong thing. Here is the question:

"My mom's will reads that she left money for her two grandaughters of her deceased son via two joint accounts set up between mom and her daughter. The daughter worked at that bank, stole the money and then closed the accounts. Not sure when the accounts were closed. What can be done?"
This area of law should be so clear, but it is currently very muddy. In your situation, it seems that everyone involved has made errors in judgment, including your mother, the daughter and the bank. The grandchildren pay for the mistakes.

In the old days, a joint account was always a joint account, and the surviving owner of the account always owned the money in the account when one owner died.

The law regarding joint accounts between generations - as in this case, a parent and child - changed in 2007 as a result of a couple of cases from the Supreme Court of Canada. The new law says that when there is an inter-generational joint account and the parent dies, the money is to be held in trust for the parent's estate and does NOT belong to the surviving child. If the parent did actually want that child to inherit the account, there are ways of documenting that intention that will stand up.

For some reason, many banks in Canada have simply decided not to follow the new law.

Many banks in Canada are still treating inter-generational accounts as regular joint accounts and still pay the funds to the child. This is probably what happened in your case; likely nobody batted an eye when the daughter cleaned out the account. Ironically, the court cases were intended to stop exactly this kind of financial abuse by children. Having said that, it's possible that the daughter had some kind of written document from your mother that confirmed she wanted the daughter to own the account. It would be in direct conflict with the will, but theoretically it could exist.

It looks as if the daughter is taking advantage of the mother's trust in her, the bank's failure to follow up-to-date legal policy, and the grandchildren. Many people in her situation do exactly the same as she has done. However, it's always possible that she had a different understanding about whether she was supposed to do with the account. Does she know what's in the will regarding this account? Has she ever come up with any written intention by her mother that would lead her to believe she could have the account for herself?

If communication has broken down or the daughter has dug in her heels, it's probably going to take a lawsuit against both the daughter and the bank to retrieve the money that was in the account. I'm not sure what your relationship is to all of this, but if you are the executor, then it's up to you to launch any lawsuit. Please see a lawyer with extensive experience in estate litigation to have a frank discussion. Present all of the facts and hold nothing back. Estate litigation is unpleasant, lengthy and expensive but sometimes it's the only solution. Think carefully before going ahead.

I and many other lawyers keep warning parents over and over again not to open joint accounts with their children, but until they start heeding the warning, this unfortunate situation is going to keep repeating itself and the children are going to keep paying for the parents' choices.