Joint Bank Accounts and Titles - It May not Work

Many people think that by placing property in joint names with someone that they are making a foolproof gift to that person effective on death. However, it doesn't always work that way. You could be causing legal confusion and litigation.

Presumption of Resulting Trust

If you place an investment, bank account or real estate in joint names, and all or substantially all of the money came from one of those people, then unless the other person is a spouse or child under the legal age, the law presumes it is not really a gift now or on death. Instead, the law presumes that this money or property will belong to the estate on the death of the donor. You can rebut that presumption in court, if you are fortunate, but you could very well lose also. Imagine how difficult, expensive, time consuming and stressful that will be. If this is your intent, make sure that you also make something in writing and sign it being absolutely clear as to what your intentions are. How can the money be used during your lifetime. What happens to the money after you die. Even then, there are subtleties in the law as to whether this is a gift of the right of survivorship during your lifetime, or an estate asset. You can prepare this type of declaration of intent yourself, but as most people have no training or skill in expressing their legal intentions and covering the elements needed under the law, it would be best to have your lawyer draft it.

Presumption of Advancement

On the other hand, if the other person on the account, investment or property is the person's spouse or child under the legal age, then the law presumes that this was a gift. However, it is not a rock-solid presumption. It can be rebutted to show otherwise. Again, if this is what you intend to do, make sure your intentions are set out in writing very clearly and signed.

Spouse or Child Under 18

On the other hand, if the other person on the account, investment or property is the person's spouse or child under the legal age, then the law presumes that this was a gift. However, it is not a rock-solid presumption. It can be rebutted to show otherwise.

Don't Focus on Avoiding Probate Costs

I often hear from older clients that someone told them they should place their property in joint names with a child to "avoid probate costs". Here are some reasons why this can lead to a problem:

  • Probate costs are only a very small part of the decision process. The court charges 0.7% ($7.00 for every thousand dollars) of the value of a person's estate. In calculating that value, jointly held properties, RSP's with beneficiaries (not the estate) and insurance policies (unless payable to the estate) might not be included. That can shrink the value that the 0.7% is calculated on. Lawyers will charge a fee to do the work. It is regulated under the Rules of Court. In 2018 it is $1500 plus 1% of the estate value. That percentage goes down after the first $500,000. It is not inexpensive, but it is not so prohibitively expensive to justify something you may regret later.
  • You can re-write your will if you change your mind. You cannot take the person's name off the title once you put them on without their written consent or a court order, and you may not be able to get the court order. The moment you are going to court, you have already spent far more than the probate costs you were trying to avoid.
  • What if you want to sell your house and buy a different one or move to a care home and live off your savings. Your child may disagree or think they know better and block you from doing this. Your child may see their "inheritance" disappearing and refuse to cooperate. It happens more often than you may think.
  • What if you no longer get along with your child. It doesn't matter if it is your fault or theirs or both. You paid for your property. You are entitled to do with it as you wish. The moment you place someone else's name on the title, you have given up that freedom.
  • What if you need to mortgage your home to raise money for some reason. The child on title will probably disagree. They will perceive their "inheritance" being diminished by this. They will also need to sign the mortgage for it to work. They will be reluctant to sign the "promise to pay" that is in every mortgage document.
  • What if you put one child on the title and later on they take the attitude it was a gift to them when you die and they don't need to share it with their siblings.
  • If you go to court to try to undo the transfer into joint names, for land at least, it may be possible to "sever" the joint tenancy if you are still alive. However, it won't completely undo the transfer. It will result in them having a title for a 1/2 interest in common and you will have a title for the other 1/2 interest in common. At least you have 1/2 of your property, but can you find a buyer for just your half?
  • Consider whether disposing of an interest in real estate, such as a cabin or revenue property, might trigger capital gains tax being payable to the CRA. It might apply to other property as well.
  • If someone was about to pass away next week, their spouse had already passed away and they decided to put their real estate in joint names with their children, that might be reasonable. However, I have yet to see someone doing this under those extreme conditions.

    Warning Only

    This article is far from a complete discussion of the above issues. If you are planning on placing your property in joint names with someone (other than your spouse), do not accept the assurance of your banker or a lay-person. It is not as fool-proof as you may be led to believe. Even if the bank form you sign indicates that the account is joint and carries the right of survivorship, the law says that is only to protect the bank so they are not dragged into litigation if they rely on it and release funds to the surviving joint holder. The Supreme Court of Canada and also Courts of Appeal from various provinces have said that the legal ownership of these accounts and investments are still in question, even when the bank form says that the survivor is entitled to it. That is why you need to put your intentions in writing clearly and thoroughly, and strongly consider whether it is a good decision at all.


    Notice:The information on this website is general in nature only. It relates to Saskatchewan, Canada and may not be applicable in your jurisdiction. It does not constitute legal advice to you and no solicitor client relationship will be established. A conflict check would also be required before our firm can act for someone. You should seek specific legal advice regarding your circumstances from a lawyer entitled to practise law in your jurisdiction.
    * Richard Carlson Legal Prof. Corp.

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