Joint Bank Accounts in Ontario: Does the Survivor or the Estate Get the Money?

A parent dies, and the bank account has two names on it: theirs and yours, or theirs and a sibling's. The will leaves everything to several children. Now you are unsure whether the money belongs to the person who survived on the account or to everyone named in the will.

The answer is often simple, but not always. This article explains how joint accounts generally fit with an estate in Ontario, why some accounts are challenged, and what to do if you are on either side of the question.

Two questions: access and entitlement

When one owner of a joint account dies, two separate questions can come up. The first is who can deal with the bank. The second is who is actually entitled to the money. The answers usually line up, but they do not have to.

For Estate Administration Tax, jointly owned assets that pass automatically to the surviving owner or owners are excluded from the estate value. How a particular account is treated beyond that depends on the facts, so it is worth confirming with a lawyer.

Some joint accounts are opened for convenience. A common example is an adult child added to a parent's account to help pay bills. In that situation it can be unclear who is entitled to the money, and the answer depends on the facts, so it is worth confirming with a lawyer before anyone acts.

How a joint account affects probate tax

Ontario charges Estate Administration Tax when probate is granted. No tax is payable on estates of $50,000 or less, and above that the tax is $15 for every $1,000 (or part of $1,000) of the estate's value. The tax is paid by the estate, not by the beneficiaries or the estate representative.

Jointly owned assets that pass automatically to the surviving owner or owners are excluded from the estate value for this purpose. Accounts such as RRSPs, RRIFs and TFSAs with a beneficiary designation are excluded too. If no probate certificate is applied for and issued, no Estate Administration Tax is due.

If it turns out that money in a joint account really belongs to the estate, that can change both who receives it and how the estate is valued. That is a reason to get advice before anyone moves the money.

Why an heir might question a joint account

Beneficiaries sometimes learn that a large account passed to one person while the will divides everything else. That can feel unfair, and it can lead to a dispute. If you are looking into an account, it helps to gather information such as:

• Whose money went into the account, and over what period.
• Why the account was opened, for example for convenience, for care, or to leave the money to the survivor.
• What the deceased said or wrote about the account, and to whom.
• How the bank's account documents describe the ownership.
• Whether the survivor used the account for the deceased's own bills.

A person who appears to have a financial interest in an estate may move for an order requiring the estate trustee to pass accounts. If a person applying for probate must notify those entitled to a share, they have to send or give them a copy of the application before filing it. These steps give beneficiaries some visibility into what the estate holds and how it is being handled.

Taxes and duties that still apply

Estate trustees carry out the will, wind up the deceased's affairs, and pay taxes, bills and other debts before distributing the estate. Estates are still presumed to be wrapped up within one year of death, although a complex estate may reasonably take longer.

A deceased person is considered to have sold all their property just before death, and any capital gain or loss is reported on the deceased's final return, not by the beneficiary. Property passing to a surviving spouse or common-law partner who is resident in Canada can avoid a gain or loss on the final return, and it generally must vest in that person within 36 months of death. For a death between January 1 and October 31, the final return is due April 30 of the following year.

The person who receives money from the estate is generally not taxed on it as an inheritance, since the CRA lists most gifts and inheritances among amounts that are not reported or taxed. An estate trustee who distributes assets before getting a CRA clearance certificate (Form TX19) is personally liable for unpaid amounts, up to the value of the assets distributed. That is one reason estate trustees are careful about timing.

What to do next

• Gather the account statements and the bank's account-opening documents.
• Do not withdraw or move the money until you know whether it belongs to the survivor or the estate.
• Write down who contributed to the account and why it was opened.
• Tell the estate trustee about the account so the estate's records are complete.
• Keep any messages or notes that show what the deceased intended.
• Speak with a lawyer before agreeing to split or release the funds, especially if family members disagree.

Frequently asked questions