Joint Investment Accounts, TFSAs and RRSPs: Survivorship Rules in Ontario

People often ask which of their parent's accounts will go through the estate and which will not. Joint investment accounts, TFSAs and RRSPs can all pass to someone directly, but through different mechanisms.

This article compares survivorship on joint accounts with beneficiary designations, and explains why an asset that skips the estate can still raise questions.

Two ways to pass outside the estate

Property passes to the estate trustee only if no one else has a right to take it by survivorship. A joint account with survivorship therefore goes to the surviving owner, whether or not there is a will. Many joint accounts include survivorship, and the surviving holder becomes the account owner.

A beneficiary designation works differently. Registered plans such as RPPs, RRSPs, RRIFs and TFSAs with a beneficiary designation are not included in estate value for estate administration tax. Insurance paid to a named beneficiary is also excluded.

Side-by-side comparison

Joint accounts can work differently from one institution to the next, and the bank sets its own documentation requirements. What that means depends on the plan and the institution, so ask the institution how it works and what happens if a holder dies.

When a joint account is not really the survivor's

An adult child added to a parent's account or asset without paying is presumed to hold it in trust for the parent and, on death, for the estate. The child has the onus of showing a gift was intended. Courts may look at the bank documents, control and use of the funds, a power of attorney, and tax treatment.

Between spouses, property held in both names as joint tenants is proof, without evidence to the contrary, of an intention to hold as joint tenants. Heirs may challenge a surviving holder, who may need to show the deceased intended a gift.

For a dependant support claim, money in an account in the deceased's name and another person's, and property held by the deceased and another as joint tenants, are deemed part of the net estate. Life insurance on the deceased's life that the deceased owned is also counted. For joint deposits, only the part that belonged to the deceased is counted.

Tax and other risks

A deceased person is considered to have sold all capital property just before death, which may produce a capital gain on the final return, even if the property passes by survivorship. Property transferred to a surviving spouse or common-law partner resident in Canada can roll over without immediate gain, if it is locked in for them within 36 months of death.

• Adding a child to an account or title as a gift may count as a sale at fair market value when you give it.
• The automatic rollover for gifts applies to a spouse or common-law partner, not to children, except qualifying farm or fishing property.
• Any named holder can withdraw at any time, and creditors could make claims if a holder goes bankrupt.

Tax treatment of registered plans can be complex, so confirm the details with an accountant.

What to do next

• List each account and note whether it is joint, or has a named beneficiary.
• Ask each institution what happens on a holder's death and what documents it needs.
• Keep records of who contributed to joint accounts.
• Ask an accountant about the final return and any gain.
• See an Ontario estates lawyer if a joint account looks like it was meant for the estate.

If you are planning your own affairs, bring your account list to a lawyer so the paperwork matches what you intend.

Frequently asked questions