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  • Writer's pictureErin Watson, J.D.

Joint Accounts & Estate Planning

When someone passes away, their estate may have to pay estate administration tax or "probate fees" depending on the value of their assets before death. This tax is charged on the total value of the deceased's estate, including all assets they owned at the time of death.


However, in Ontario, estates with a value of less than $150,000 are not required to pay this tax. To reduce the amount of estate administration tax owed, some people may choose to put assets under a joint name with a spouse or children.


In Ontario, assets that are jointly owned with a right of survivorship are transferred to the other named owner upon death, and they are not subject to estate administration tax.


Parents & Children

When accounts are held jointly between parents and minor children, the court presumes that the funds in the account are intended as a gift to the child and will be inherited through survivorship. However, when it comes to joint accounts held between parents and adult children, including dependent adult children, the court applies the presumption of resulting trust.


Unless the adult child can provide evidence that proves their parent(s) intended for them to inherit through the right of survivorship, the funds will be returned to the estate to be shared among the deceased's beneficiaries and will be subject to any applicable taxes.


Spouses

For married spouses, the presumption of advancement applies, meaning that a surviving spouse will inherit the funds in the account through survivorship. However, for joint accounts held between common-law spouses, the presumption of resulting trust applies.


Joint Account Risks

While joint accounts can be useful, they come with risks. Both account holders have equal rights to access joint accounts, and either party can drain the account of its funds. Joint accounts may also be subject to claims from the other party's creditors or a valid asset to target in certain family law proceedings. Additionally, joint accounts are often the subject of family conflict and can become fertile grounds for bitter estate litigation.


It is crucial for joint account holders to make their intentions known. Parents who want their children to inherit their joint account through survivorship should express such an intention in their will. Parents who only want help managing their banking and finances should consider appointing their child as an attorney for property instead. Seeking professional advice is essential when considering using joint accounts as a planning tool due to the rapidly changing laws, inconsistent case law, and inherent risks involved in their creation.


For additional information on this or any other Estate-related matter, feel free to contact our E is for Estate team. CONTACT US HERE. Erin Watson, J.D.

E is for Estates

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