Hey there, time traveller!
This article was published 15/10/2013 (954 days ago), so information in it may no longer be current.
Paula Peterson was close to her father. Mr. Peterson was told by a financial adviser joint ownership was a good way to pass his wealth on to the next generation. He changed all his investments and bank accounts to be in joint names with Paula. More specifically, the accounts were put into "joint tenancy." That meant she would be able to claim the full balance in the accounts at his death. They would not fall into his estate -- that was the plan, at least.
When Mr. Peterson died, a fight boiled up. The issue was whether Paula would keep the contents of the accounts or if the money should be added back into the estate. These kinds of disputes usually occur when a person has several children who will inherit the estate, but only one child is listed as owner on the joint tenancy. That child may attempt to keep all the money and not share it.
Joint tenancy is tricky. When a person such as Mr. Peterson transfers a bank account, land or other property out of their name and into joint tenancy, the results may be unanticipated. A "resulting trust" springs up if the child is an adult. That means a person such as Paula who takes the property after the death of the original owner does not really own it at all. They hold it as a trustee for the estate of the deceased person.
In a jurisdiction where probate fees are payable, that means probate would have to be paid on the asset. That also means creditors of the estate can go after the joint property. Most importantly, it also means beneficiaries of the estate can demand the property be returned to the estate. That way, beneficiaries can take the property and divide it among them.
What if your family is using joint tenancy? A clear statement of intention will trump the presumption of resulting trust. It depends on what the original owner really intended. That clear intention is best expressed in writing. A letter can be drawn up explaining whether the property is to be returned to the estate or not. The letter could say, "I want my son to have the property for his own use after I die... He need not share it with anyone else." An agreement or formal written document prepared by a lawyer is even better than a simple letter. A lawyer is able to get the wording just right.
Joint ownership remains a way to pass assets on to the next generation. It has to be done carefully. You do not want to end up like Paula in the story above. No one wants to go to court. This case went all the way to the Supreme Court of Canada. The court held that Paula's father actually intended she keep the money. The details in the story were taken from the published decision of the court that decided the case. The family name was changed to save them embarrassment.
John E.S. Poyser is a lawyer with Tradition Law LLP. Contact him at 204-947-6802 or firstname.lastname@example.org, or visit www.traditionlaw.ca.