Recent court cases have provided some clarity as to what happens to the proceeds of a bank account held jointly between an elderly parent and their adult child, when the parent passes away. These cases typically involve children who hold different interpretations of their parent's intentions regarding the bank account. On the one hand there is the child who by "rights of survivorship" (as set out in the bank documents) has inherited the account. It is their belief that their parent intended to "gift" them the proceeds of the account upon death.
However the child (or children) not joint on the account often has a different opinion of their parent's intentions. Specifically, they may believe that the account was made joint only to allow their parent more convenience with respect to their day-to-day banking. Furthermore, as a gift was not intended, the proceeds of the account (upon their parent's death) should pass through the estate (and be distributed according to the terms of the Will). In many instances these contending beliefs result in a legal battle, with one sibling pitted against another.
When cases of this nature are brought before the court, an examination of any documented evidence which may help establish the intention of the deceased parent, takes place first. In instances where no such evidence can be found, courts often look to certain legal "presumptions" for guidance.
A "Presumption of Resulting Trust" could be argued in cases where the deceased parent was the only contributor to the account which was subsequently made joint so an adult child could assist their parent with the day-to-day banking. This argument is made stronger if there is no evidence to support the parent's intention to make a gift to their child (i.e. to the surviving account holder). If the "Presumption of Resulting Trust" is accepted by the court, the monies within the joint account will no longer be considered jointly held and will pass through to the estate of the parent.
Alternatively, a "Presumption of Advancement" could be argued in that a parent may give gifts to their children (including adult children) out of generosity, affection, or by their obligation to support them. This would support the proceeds of a joint account passing to a child as joint owner of the account.
As these two presumptions are often at odds with one another, they may be dismissed if case evidence determines one of them to be wrong. Furthermore, as new cases are brought to trial (and appeals heard) the application and understanding of these two presumptions will continue to evolve. For example, two recent cases (Pecore v. Pecore and Madsen Estate v. Saylor) came before the Supreme Court of Canada. The decision of the court provided some clarification regarding the two presumptions.
Both cases involved bank accounts which an elderly parent made joint with one of their children. Disputes arose whether the surviving joint account holder was entitled to all the money in the bank account. It was the opinion of the Supreme Court that the "Presumption of Advancement" only applies to minor children as only minor children need support from their parents. Therefore, adult children who normally do not need support cannot rely on this presumption. Furthermore the Supreme Court accepted the "Presumption of a Resulting Trust" where "ageing parents transfer their assets into joint accounts with their adult children in order to have that child assist them in managing their financial affairs".
Ultimately the court will place greater weight on evidence of the parent's intention, not the two guiding presumptions. Therefore, as part of your estate plan please ensure you carefully document your intentions with respect to jointly held assets. Using the services of a lawyer is highly recommended.
