Joint Tenancy Presumption that Money is Held In Trust
Charles B. Wagner
A common flash point in estate litigation are assets held in joint tenancy between the deceased and a child.
That child claims the money or asset belongs to him by right of survivorship. The other children say that their parent only created the joint tenancy to be helped with their finances & the money belongs to the estate.
This article examines the law in Canada and reviews two recent Supreme Court of Canada Decisions about joint tenancy and the presumption of resulting trust and advancement.
Lawsuits often start when siblings discover that one child was made a joint account holder by a parent. When the parent dies, the child as the remaining joint tenant, claims the money by right of survivorship.
Imagine that Dad had three children. His two sons live outside the province and his daughter assists in managing his financial affairs. At a later stage in life ,Dad takes a trip to the local bank and makes his daughter a joint account holder. All the money in those accounts was earned by Dad. When the father dies the daughter claims that money by right of survivorship and the sons cry foul. They claim the money belongs to the estate. If this sounds familiar it's because the elderly often turn to close friends or family to manage their money and the perception of unfairness or possible wrongdoing and greed commonly results in estate litigation.
The courts first look to the evidence. When there is a clear documented intention of the deceased that the joint holder of the accounts should get the money upon his death then the decision is an easy one. But what happens when the evidence is not so clear?
The court's have traditionally relied on certain presumptions and use them as guides when insufficient evidence exists to definitively ascertain the deceased's intentions. Historically, the Presumption of a Resulting Trust and the Presumption of Advancement are two competing presumptions that come into play when money held in a joint account is being fought over.
Presumption of a Resulting Trust
The Presumption of a Resulting Trust stems from the idea that people make bargains, they do not make gifts. Based on this presumption, unless the evidence proves otherwise, the court's starting point is that if "A" deposits all the money into a bank account held jointly with "B" then the court assumes that "B" would not keep the money when "A" dies. The Court presumes that "A" intended that money to be held in trust for "A's" estate.
Presumption of Advancement
The Presumption of Advancement stems from the idea that people give gifts to their children. So that when "A" deposits money into a joint account with "A's" child the court presumes it was with the intention that A's child should receive that money when "A" dies. This presumption is based on the idea that parents recognize an obligation to support children and advance monies to them. Based on this presumption some courts have held that, unless the evidence proves otherwise, if Dad deposits all the money into a bank account held jointly with his child then the court would presume that he intended that money to belong to that child when the father died.
In the McLear Estate case (1) an Ontario judge rejected the Presumption of Advancement and accepted the Presumption of Resulting Trust when an adult child and an elderly parent hold assets together in joint tenancy. Justice Heeney stated, "The presumption that accords with this social reality is that the child is holding the property in trust for the ageing parent, to facilitate the free and efficient management of that parent's affairs. The presumption that accords with this social reality is, in other words, the presumption of resulting trust." In contrast, there is a line of case law prior to the McLear Estate decision that suggests the presumption of advancement applies to adult children as well because parents give gifts to their children out of affection.
Two court cases came before the Supreme Court of Canada recently that clarified the matter. Pecore v. Pecore and Madsen Estate v. Saylor reviewed and elucidated the law regarding these presumptions. Both cases involved bank accounts which an elderly parent made joint with one of their children. Disputes arose whether the surviving joint account holder was entitled to all the money in the bank account. The Supreme Court of Canada explained:
Intention of the Deceased is the determining factor - Presumptions are only guides. If the deceased really wanted his/her child to receive the money in the bank account after his/her demise then the courts will give effect to that intention. When the evidence is unclear as to the deceased's intention then the courts use presumptions as working guides as to that intent. The presumptions are rebuttable if evidence can demonstrate them to be wrong.
Presumption Of Advancement Only Applies to Minor Children. The court opined that the Presumption of Advancement (i.e. that parents give gifts to their children) was based on the idea that minor children needed support from their parents. Accordingly, adult children who normally do not need support cannot rely on the Presumption of Advancement. The Supreme Court of Canada adopted the reasoning of the McLear Case and stated that "... I am therefore of the opinion that the rebuttable presumption of advancement with regards to gratuitous transfers from parent to child should be preserved but be limited in application to transfers by mothers and fathers to minor children."
Presumption of Resulting Trust was accepted in the Estate Context. The Supreme Court adopted Justice Heeney's view in the McLear Case and stated. " it is common nowadays for ageing parents to transfer their assets into joint accounts with their adult children in order to have that child assist them in managing their financial affairs. There should therefore be a rebuttable presumption that the adult child is holding the property in trust for the ageing parent to facilitate the free and efficient management of that parent's affairs."
The obvious question is what will the courts accept as sufficient evidence of the Deceased's intention to have the joint account asset pass to the survivor?
The Supreme Court of Canada expressed the view that bank documents, power of attorney documentation, control and use of the accounts and tax treatment of the account would all be relevant evidence. In my view, nothing can replace careful documentation of the deceased's intention by the lawyer assisting in the client's financial planning.
These two decisions have underscored the need to carefully document the testator's intentions with respect to jointly held assets. As a result of these two recent decisions two lawyers specializing in the field of estates, Barry Fish and Les Kotzer, created a Joint Asset Planning Kit
which purports to "eliminate any ambiguities involving joint accounts."
One thing is very clear - ambiguity and failure to definitively document the testator's intention opens the door to estate litigation. We live in a very litigious world where people of good faith often disagree. Too often the disputes cannot be resolved and end up in court. This is especially so when family members are at odds with one another and receive mixed signals from parents about their intentions regarding the estate. Despite the temptation to jump to conclusions, it would be a mistake to substitute this review of the topic for substantive legal advice. For those considering this option, there is no replacement for a competent solicitor's own research, analysis and judgment. ABOUT THE AUTHOR: Charles B. Wagner is an experienced estate litigator in Toronto whose inheritance litigation practice includes law suits involving disputes about property held in joint tenancy. The boutique law firm's practice is often used by its American clients and lawyers who have concerns revolving around estate and elder law litigation in Ontario. Contact Charles B. Wagner
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