Clarity is Key in Estate Planning

Spoiler alert - testamentary intention should always be made in writing (ideally with professional advice) and properly witnessed.

It is common for an adult child to be added as joint holder of a bank or investment account with an aging parent. This allows the child to help manage the funds, perhaps provide signatures or bank visits when necessary and ultimately to make the estate settlement process simpler.

With a joint account with right of survivorship, the asset immediately becomes property of the survivor when one of the people dies. This avoids the requirement for probate for these assets and makes the funds immediately available to the survivor, rather than waiting until the estate is settled.

The same holds true for joint ownership of a house or other real estate.

This works fine when there is only one child in the family. But what if there are two or three or more children?

What was mom’s intent with that money? If a bank account, investment account or house is a major asset of the estate, and it’s now in the hands of one of the children, how do the others feel?

If mom had failed to make her testamentary intention clear, then such an arrangement is likely to end up in court.

On the other hand, if mom had received legal advice independent of the receiving child, and had clearly stated in writing that it was her intent for the child with joint title to inherit that money separate from the estate, then the other children have no legal grounds.

If, on the other hand, mom had stated clearly that those assets were to be included in her estate and divided among all her children under the instructions in her will, then that’s also very clear legally.

The exact same logic and advice applies to gifts made by the elderly parent to one child and not to others. Was this a pure gift over and above that child’s inheritance? Or was it instead meant as a pre-inheritance and part of that child’s share of the estate?

In the absence of clear written instructions from mom, courts will determine that the money is actually held in trust by that child for the estate. This was determined by the Supreme Court in 2007 in a famous case called Pecore vs Pecore. The gift is presumed to be a “resulting trust”, unless the recipient child can prove the parent intended to benefit her and not the estate.

A 2023 Ontario court case determined essentially the same thing in the case of a joint bank account.

As with everything in life, make your intentions clear and unequivocal, with no room for ambiguity. In the case of financial or legal items, do it in writing, and let the other children know what you’re doing and your intent.

Get everything on the table and clear now, to avoid any portion of the estate going to legal fees and, most importantly, to keep your family together after you pass away. 

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Dollars and Sense is meant as an introduction to this topic and should not in any way be construed as a replacement for personalized professional advice.

Please consult legal, tax, insurance and investment experts for advice on your unique situation.

David Christianson, BA, CFP, R.F.P., TEP, CIM is recipient of the FP Canada™ Fellow (FCFP) Distinction.  He is a Senior Wealth Advisor and Portfolio Manager with Christianson Wealth Advisors at National Bank Financial Wealth Management, and author of the book Managing the Bull, A No-Nonsense Guide to Personal Finance.