How Joint Ownership Can Transform Your Financial Future!

Transfers of property into joint ownership are common will substitutes. However, these transfers can cause estate disputes.

Joint ownership questions are frequent issues in estate lawsuits. If you are involved in a transfer into joint ownership, you should know what can go wrong. You could become involved in a lawsuit.

I introduced resulting trusts in my blog post, Legal vs. Beneficial Ownership: What You Need to Know. If you are only the legal owner of a joint asset and not the beneficial owner, beware: you may only be holding the asset for a beneficial owner.

Joint Bank Account Presumptions

Let’s define some terms regarding joint ownership.

Cheryl gives Leo signing authority on a joint bank account so Leo can help pay Cheryl’s bills.

Joint accounts can be set up with persons for convenience only. This arrangement can avoid having or using powers attorney for property. This commonly occurs, for example, with older adults to manage paying their bills. There may not be rights of survivorship on the joint account.

Joint accounts are also used as will substitutes. These can reduce provincial Estate Administration Taxes (EAT), formerly probate taxes. This attempt is to save provincial EAT can be a costly misadventure if disputes arise over who owns rights of survivorship of a joint account (JTWROS).

What happens if Cheryl gives Leo rights to survivorship on the account? Did Cheryl want Leo to keep the money for himself if something happens to Cheryl? Or did Cheryl want Leo to share the money with Cheryl’s siblings? Did Cheryl intend a gift to Leo? Was there sufficient evidence that a gift on terms was made before Cheryl’s death?

Surviving joint owners may need to prove who is the beneficial owner of any joint account. Courts can presume a resulting trust is created. Legal obligations are then imposed on the surviving joint owner (Leo). Courts can consider the surviving joint owner a fiduciary and deny them any rights to inherit. Leo may be found to be holding the joint account in trust for Cheryl’s estate.

Courts impose resulting trusts if there is a gratuitous transfer of property to Leo. That means:

1. There is no proof of a gift or
2. No money changed hands (no value is exchanged)

Under these circumstances, courts presume a resulting trust applies. Let me repeat: the surviving joint owner is a fiduciary. As a result, the asset is held in trust for Cheryl, the beneficial (real) owner.

What is a Valid Gift?

According to recent court decisions, a valid gift requires proof of 3 things:

1. specific intention to make the gift;
2. delivery of the gift; and
3. acceptance of the gift.

The Supreme Court of Canada confirms that intention to gift is best demonstrated when the transfer into joint ownership happens. This is why a gift letter can be a valuable point of proof.

If there has been a gratuitous transfer of property to you, then the resulting trust means you are holding the asset in trust for the original owner. There are also possible tax consequences to consider. Discuss this with tax advisors.

This post is not legal or tax advice.

Do you have more questions about joint ownership? I have answers. Contact me for a meeting to discuss your questions. I look forward to helping you.

I am a Certified Specialist. Estate law is all I do.