Where does the money in my joint bank account go?

bank account joint Apr 22, 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:

Joint Bank Account with SPOUSE:

A bank account held jointly by spouses has many benefits – one being convenience. It enables both parties to deposit or withdraw monies in accordance with any guidelines set by the account. The pairing may choose to hold a primary joint account that is used to pay bills with ease, and to hold additional accounts in each of their individual names – and that is fair, but if the intent is to avoid probate altogether, this may not be functional.

If spouses hold a bank account jointly and one spouse passes away, the surviving joint owner will automatically obtain the deceased person’s share. This is known as a survivorship right, and it could facilitate the bypass of probate, but only if ALL assets are held jointly.

If not ALL of assets are held jointly by spouses, the accounts held in any one person’s name will form a part of the residue of their estate. If their spouse is the primary beneficiary on their Will, the spouse will still inherit the funds, but they will likely be required to submit a probate application of the Will to collect in the assets.

Joint Bank Account with CHILD:

This is where things can get complicated. Let’s discuss three reasons why a parent might hold a bank account jointly with their child:

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.

When a child is 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.

If a parent’s intent is to distribute the funds in the account to their child, it should be specified in their Will.

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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