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What happens to your joint bank accounts when you die?

estate planning Jun 19, 2019

Intent: A desire and will to act in a particular way.

It is this premise that serves as the foundation for determining how funds will be distributed in a joint bank account. The exact definition of “intent” becomes an issue when a parent holds a joint bank account with their child – let us explain:

Parents may hold a bank account jointly with their children because:

  1. It is intended as a gift via the right of survivorship;
  2. To assist their child financially; or
  3. For their child to assist them with the management of their financial affairs.

While the right of survivorship is presumed when spouses hold a joint account – in other words, the account is recognized as a gift – there is no such presumption for an account held between a parent and child. For the surviving child to be entitled to the account, they must establish the parent’s (the transferor’s) intent to provide them with this right. Both parties depositing funds into the account is not sufficient to establish intent of a right of survivorship, and while it may be beneficial to have an account agreement in place providing evidence of the transferor’s intention as to how the funds should be dealt with, the document still might not be clear. So how is intent determined? The estate’s trustee may have to look at account activity in an attempt to ascertain the purpose of the account. If a parent's intent is to distribute the funds in the account to their child, it should be specified in their Will.

Another scenario that may arise is a child being named on an account to assist the parent with their financial affairs and the parent passes, the account will fall into the residue of the parent’s estate. It is not for the child to claim as their own. To ensure that this is clear, it is recommended that the parent create an Enduring Power of Attorney authorizing their appointed Attorney (child) to handle all financial affairs.

Conclusion:

When spouses hold a joint bank account, the right of survivorship is presumed. For an account held jointly by parent and child, intent for the account to transfer via the right of survivorship must be proven. Otherwise, it will form a part of the residue of the parent (the transferor)’s estate.

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