Supreme Court Rules on Joint Accounts PART1

In two much anticipated decisions, the Supreme Court of Canada ruled on the legal presumptions to be applied when determining the intention of the transferor as to the survivorship interest in a joint account on the death of the transferor. Both cases involved an aging parent gratuitously depositing funds into a joint account opened with one of several adult children. The principles set out by the Supreme Court when dealing with this type of situation can be summarized as follows: 1. The presumption of resulting trust applies in cases of a gratuitous transfer of property from a parent to an adult child. This shifts the onus to that child of establishing on a balance of probabilities that the parent intended to gift the right of survivorship to whatever assets are left in the account to the survivor. Where there is insufficient evidence to rebut the presumption, the assets will be treated as part of the parent’s estate to be distributed according to the parent’s Will. 2. Some of the evidence which may be considered by the court in determining the intention of the parent includes:  evidence of the relationship between the parent and the child holding the account;  wording in bank documents that suggests the parent’s intention as to the beneficial interest in the account;  control and use of the funds in the account;  granting of a power of attorney; and  tax treatment of joint accounts. Background Joint accounts with right of survivorship (hereinafter referred to simply as joint accounts) are used by many Canadians for a variety of purposes, including estate planning and financial management. An elderly parent may often use a joint account to transfer assets on death outside of the estate to minimize potential probate tax payable and to simplify the administration of the estate. The parent may also use a joint account to allow a child to help him or her with the day-to-day management of the account
The varying intentions of the parent in setting up the joint account can lead to confusion among family members after the parent has passed away. Did the parent intend to gift the beneficial interest in the joint account to the child whose name is on the joint accounts? Or was it the parent’s intention for the child to hold the assets in the joint accounts in trust for the benefit of the parent’s estate to be distributed according to parent’s Will? The difficulty here is that the parent is no longer around to state his or her intentions. It is often left up to the courts to determine the parent’s intention after the fact. Two such cases were heard by the Supreme Court of Canada and the Court’s decisions were released on May 3, 2007. A brief background of each case is provided below: