Executor and Joint Bank Accounts or Joint Property in Ontario

A parent adds an adult child to a bank account, then dies. Does the money belong to the child as survivor, or does it form part of the estate? This question causes many disputes between family members and executors.

The answer often turns on what the parent intended. This article explains the starting presumption in Ontario, how it can be rebutted and what it means for an executor.

The starting point: resulting trust

Under Pecore v. Pecore, 2007 SCC 17, as applied by the Court of Appeal for Ontario, a gratuitous transfer from a parent to an adult child, including putting an account into joint names, is presumed to be held on resulting trust for the parent's estate.

In plain words, the law starts by assuming the parent did not mean to make a gift of the money. The adult child holds it for the estate unless the evidence shows otherwise.

There is an exception for minor children. For a transfer from a parent to a minor child, the presumption of advancement (a presumed gift) is the starting point, not resulting trust.

How the presumption can be rebutted

The presumption can be rebutted by evidence of the transferor's contrary intention at the time of transfer, on a balance of probabilities. The focus is on what the parent intended when the account was set up.

• Bank documents for the account.
• Who controlled and used the funds.
• Any power of attorney.
• How the account was treated for tax.

In Sawdon, the joint accounts passed to the survivor because the father intended to give the right of survivorship. Each case turns on its own evidence.

What this means for the executor

An executor should not assume either way. Joint accounts may be the survivor's, or they may be estate assets held on trust. If the survivor claims the money is theirs, and beneficiaries say it belongs to the estate, the executor is in the middle.

Accurate records of the estate's assets matter. Writing down which accounts were joint, when they were opened and what the documents say will help if the question is raised later.

If the estate's accounts are passed through the court, notice goes to beneficiaries and other interested persons, and the estate trustee swears an affidavit verifying the accounts. A decision about a joint account is easier to explain when the paper trail is clear.

If an executor makes a mistake, the court may relieve a trustee who is personally liable for a breach of trust, wholly or partly, if the trustee acted honestly and reasonably and ought fairly to be excused for the breach and for not obtaining the court's directions. Whether that could apply to you depends on the facts, so it is worth confirming with a lawyer.

Joint assets and Estate Administration Tax

For Estate Administration Tax, jointly owned assets that automatically become assets of the surviving owner or owners are excluded from the estate's value. So are RPPs, RRSPs, RRIFs and TFSAs with a beneficiary designation.

The rate for applications made on or after January 1, 2020 is $15 for every $1,000 (or part thereof) of estate value over $50,000, and estates of $50,000 or less pay no tax. If an asset is later found to belong to the estate, the value of the estate may be affected. An amended Estate Information Return is due within 60 days of learning the information is incomplete or inaccurate.

The return matters. Failing to file the Estate Information Return, or filing a false or misleading one, can lead to a fine of at least $1,000 and up to twice the tax payable, up to two years' imprisonment, or both. Real estate outside Ontario is excluded from the Estate Administration Tax value, but vehicles and vessels are included whether they are in or outside Ontario.

Before you distribute anything

A disputed joint account is a good reason to slow down before paying out the estate. Before distributing any property, the legal representative of a deceased taxpayer must obtain a clearance certificate from the Minister, confirming that all tax amounts have been paid or that security for them has been accepted. A legal representative who distributes property without the certificate is personally liable for the unpaid tax, up to the value of the property distributed, and the Minister may assess them at any time.

The certificate is requested on Form TX19 after the required returns are filed and assessed and all income taxes are paid or secured. An estate with a GST/HST number also needs Form GST352 for clearance.

• After giving the required notice to creditors and once that period has expired, an estate trustee may distribute having regard only to the claims they then have notice of.
• A creditor's or claimant's right to follow the estate's assets into the hands of the people who received them is preserved, even after a protected distribution.

How much to hold back while a joint account question is open depends on the facts, so it is worth confirming with a lawyer or accountant.

What to do next

• List every account and property held in joint names.
• Collect the bank documents, account opening forms and statements.
• Note who deposited, who withdrew and who paid the account's tax.
• Find any power of attorney and how it was used.
• Talk to a lawyer before releasing or claiming disputed funds.

Frequently asked questions