Any asset which is held in joint names will pass to the survivor when one of the joint tenants dies. The asset passes outside of the estate and therefore avoids probate fees. Because of this, it can be a very effective estate planning tool.
There are however several problems that have arisen with joint accounts. One is that there was a decision of the Supreme Court of Canada, Pecore v. Pecore, 2007 SCC 17 which held that where evidence of the transferor’s intention is unavailable, a presumption of a resulting trust applies to the gratuitous transfer of assets by a parent into a joint account held with an adult child. This means that the transfer will not be effective and any funds received by the adult child must be repaid to the estate.
In order to deal with this presumption, anyone who puts assets in joint names with their adult children should sign a sworn declaration describing what their intention is. Did they intend the adult child to retain the joint asset after their death?
Another way is to add a clause in the transferor’s will describing the joint asset and stating their intention – that it will pass to the joint tenant on their death.
Another decision of the Supreme Court of Canada, Madsen Estate v. Saylor 2007 SCC 18 held that the presumption of advancement applies for transfers between a parent and a minor child. In other words, the minor child would retain the joint asset after the death of the transferor.
It is very hard to reconcile these two decisions.
Deborah A. Todd