As parents age, they will often start transferring assets to their children, or put their assets in the joints names of themselves and their children. Additionally, you will often see the parent add one of their children’s names to their banking account, and thus making it a joint account, so the child can help them with their day-to-day banking needs. In those cases the parent’s intention is to keep their money for themselves and have it distributed in their estate.
The issue arises as to whether the parent intended for the transfer of assets to actually be a gift or whether it was done for estate planning purposes.
Prior to the 2007 decision of the Supreme Court of Canada, there was a presumption of advancement, which said that any gift from parent to child was a gift, regardless of the child’s age.
Now, the presumption no longer applies if the child is an adult. Rather it is presumed that the money was transferred to the child in trust. When it is a bank account that was transferred into the joint names of the parent and child, the issue arises because generally joint accounts have a right of survivorship. This means that the person who remains alive at the end of the day is entitled to the contents of the account, according to the bank documents.
But this may not be true according to estate law.
The Supreme Court of Canada dealt with this situation in 2007. While the bank agreement may allow either party to withdraw any or all funds from the account at any time and each party may have a right to survivorship, the Supreme Court of Canada states that the issue arises when only one party has been paying into the account and she (the parent) dies first.
The question that remains is whether the parent intended for the other joint account holder to have the funds or whether they intended for the account to be distributed according to their will. The presumption is that the child holds the account in trust for the parent’s estate. But this presumption can be rebutted by the child, if they have evidence to show their parent’s intentions were that the account was a gift to them. This can be a difficult thing to prove in some cases.
Some of the factors the court will look at include the wording of the bank documents, the control and use of the funds in the account, the granting of a power of attorney, and the tax treatment of the joint account.
Of course, looking at the intentions of a person who has now passed away can be complicated and may not accurately reflect what the parent intended.
If the parent’s intention was merely for the child to help with their day-to-day banking needs, it would be less confusing for everyone involved if the parent granted the child a general power of attorney rather than putting the account in their joint names. This would allow them access to the account for those needs.
If it is the intention of the parent to gift the account to the child upon his or her death, the easiest way to make this clear is to leave the account as a specific bequest in their will.
» Breena Murray is an articling student-at-law with Paterson, Patterson, Wyman and Abel, with offices in Brandon, Neepawa and Virden.
Republished from the Brandon Sun print edition March 31, 2012