Joint Accounts: Are They Helpful in Estate Planning?

Since starting to build my estate related practice, one of the common questions I get asked is how to organize assets to avoid probate fees or estate tax. The question has often come from the adult children of a parent that are wondering if mom or dad are being smart in their estate planning, as it is often these same children and their siblings that are the beneficiaries of their parent’s estate.

Sharing a Joint Account

So why have a joint account with your parent or child? The obvious reasons are the simple ones:

1. You can use the right of survivorship to avoid the necessity to obtain probate for the account when the elder parent passes; and,
2. The joint account allows the adult child to assist an aging parent with finances and paying bills without the formality of a Power of Attorney.

Estate Planning Without a Joint Account

Given the above, the choice to put assets in joint ownership would seem to be a simple one. However, those of us with litigation practices know that even the best laid plans can go astray. That is why when speaking with clients we often advise against this sort of financial planning. Why?

1. If a dispute arises and the adult child decides they want to clear out a joint account there is nothing to stop them;
2. The adult child could run into some debt troubles and the account or asset is in jeopardy due to the fact that they have an interest in the account that a creditor could attempt to seize;
3. If your child becomes involved in a matrimonial dispute with their spouse, the spouse may attempt to claim an interest in all of the things your child has an interest in, including the joint account;
4. After your passing, if your intentions hadn’t been made clear (i.e. whether the surviving joint account holder – your child – was to receive the balance of the gift or was to hold it in trust for herself and her siblings), then the ambiguity could give rise to estate litigation brought by one of the siblings.

The Supreme Court of Canada in Pecore v. Pecore, [2007] 1 S.C.R. 795 created the rebuttable presumption that joint assets with an adult child are to be held in trust for the deceased parent’s estate. While the presumption from the Pecore case is helpful, it does nothing to limit the legal costs if a potential beneficiary launches a legal challenge.
 
The one thing that can help in such a situation is clear evidence of the intention of a deceased with respect to the treatment of joint assets. Given the potential legal costs arising from a challenge, it raises this question: If you have joint assets with your adult children, why not have them sign a document evidencing your intentions with respect to these assets?