What Happens When a Joint Bank Account Holder Passes Away?
Naming a family member, loved one or friend as the joint account holder on a bank account may be an effective way to avoid expenses and delays after the primary account holder passes away.
Generally, assets in an estate named in a will in Alberta must pass through probate before being distributed after death.
Naming a joint account holder may help you get around this time-consuming process and pass assets directly to the intended beneficiary without probate — but it can also have unintended consequences that you need to be aware of.
If you’re contemplating adding a second account holder to your bank account — or a loved one is considering adding you to a bank account — you should first understand the legal implications of doing so.
What is the presumption of advancement?
Under Alberta law, the “presumption of advancement” principle once applied to all matters involving joint bank accounts.
This meant that assets in a joint account would automatically pass to the surviving joint account holder when one joint account holder dies.
However, because of frequent misunderstandings between the primary and secondary account holders and problems raised by family members and intended beneficiaries named in wills, this presumption has been reviewed.
Sometimes, for instance, the primary account holder named a joint account holder simply to avoid probate or pay bills on their behalf. The joint account holder was not necessarily the intended beneficiary of the assets. Such complex matters often ended up being decided by the Alberta courts.
Does the presumption of advancement still exist in Alberta?
Because of the many issues before the courts, the Supreme Court of Canada ruled in Pecore v. Pecore 2007 SCC 17 that the presumption of advancement no longer applies to joint bank accounts (in most circumstances).
Pursuant to that ruling, adding an adult child to one’s bank account no longer created a presumption of advancement but instead a presumption of resulting trust.
What does this mean?
Say that a parent has four children, all named as equal beneficiaries of the estate according to a legally enforceable will.
The oldest child, Sam, is added to the parent’s bank account and becomes a joint account holder. When the parent passes away, there is a presumption that Sam is holding the funds in the joint bank account in trust for the estate. All four children named in the will are then entitled to an equal share of these assets.
How does the Pecore decision affect your estate planning?
The Pecore decision is only a presumption of resulting trust. This means that it can be rejected (rebutted) if it is thrown into sufficient doubt by the available evidence.
So, if Sam could prove, on the balance of probabilities, that the parent intended the assets contained in the bank account as a gift to the joint account holder, it may be sufficient for a judge to rule in his favour as the rightful beneficiary of those assets.
Note that if Sam was still a minor child at the time of the death of the primary account holder, the presumption of advancement principle still applies, meaning that Sam would inherit all the assets.
The presumption of resulting trust only applies where the secondary bank account holder is an adult.
When you’re planning what happens to your assets after you pass away, consider the legal ramifications of adding a joint holder to your bank accounts. It’s best done to talk your situation through in detail with a qualified estate planning lawyer.
If someone dies intestate (without writing a will), the province’s succession laws govern what happens to the assets in the estate.
Under the Wills and Succession Act of Alberta, assets usually pass to the family members in a strict order of priority.
In the following three circumstances, ex-spouses or ex-adult interdependent partners have no right of inheritance of assets from the estate (they are considered to have predeceased the deceased person):
- If the deceased and their spouse or partner lived separate and apart for more than two years before death.
- If the deceased and their ex-partner or spouse signed a declaration of irreconcilability under the Family Law Act.
- If the deceased and their partner signed an agreement or order (concerning their property or other marital or family issues) that appears to have been intended by one or both of them to separate and finalize their affairs in recognition of their marital breakup.
If none of the three above scenarios apply, an ex-spouse or partner may be able to claim against an estate. This can be a source of great conflict between family members when no will clearly relates the intentions of the deceased.
To make a decision, the court will need to consider the nature and duration of the relationship between the ex-partner and the deceased and the age/health of the surviving partner or spouse, among other factors.
If you need advice when planning your estate, speak to an experienced estate planning lawyer at Vest Estate Lawyers in Alberta for an initial consultation about your needs.
We currently have three offices across Alberta — Edmonton, Calgary, and Red Deer. However, we serve the entire province of Alberta. We also have the infrastructure to work with any of our clients virtually — even the furthest regions of Alberta.
We also have a dedicated intake form to help you get the ball rolling. Our intake team will review your specific case and advise you on the next steps to take and what to expect moving forward.
Our offices are generally open 8:30 a.m.—4:30 p.m., Mon—Fri.
WILLS and ESTATES LAWYER
Chelsea is a lawyer in the firm’s Edmonton office. She carries on a varied practice, focusing on all forms of estate planning and estate administration.