Joint Accounts with Right of Survivorship

What happens to a joint bank account with right of survivorship when one of two joint account holders dies? From the bank’s perspective, the surviving account holder is entitled to the account. But the law in British Columbia is more complicated.

Where the deceased person had contributed all of the funds to the joint account, the law is that if the deceased had intended that any money in the account would go to the surviving joint account holder as a gift, then the surviving joint account holder is entitled to keep the money. If not, then the surviving joint account holder is obligated to give the money to the deceased executor or administrator to be distributed to the beneficiaries of the deceased estate.

It is important to distinguish the relationship of the bank and its customers on the one hand, and the relationship between the two customers, on the other. In Niles v. Lake, [1947] 2 D.L.R. 248, the Supreme Court of Canada held that although the banking documents provided that on the death of one account holder, the surviving account holder was entitled to the proceeds of the account, this clause was intended to protect the bank. This clause did not determine the rights to the proceeds of the account as between the deceased’s estate and the surviving account holder. The bank could allow the surviving account holder to withdraw the proceeds from the account, but the deceased estate could still claim the proceeds from the surviving account holder.

In many cases the deceased contributor to the joint account has not made his or her intentions clear. Supposing a father has transferred money from a bank account into joint account with right of survivorship with one of his three children. In his will, he left his estate in equal shares to all three children. The father then dies. Is the one child entitled to keep the funds in the joint account? Unless the father clearly documented his intentions, we really don’t know the answer. If there is a dispute, the court will have to try to determine what his intentions were from all of the circumstances.

Where there is no evidence of the deceased’s intentions, the general rule is that the funds belong to the estate. This is called a resulting trust. There is an exception where the joint account holder was the deceased contributor’s spouse, in which case the presumption is that the deceased intended to make a gift to the spouse, and there may be an exception where the surviving joint account holder is the contributor’s child. [Since I wrote this post, the Supreme Court of Canada has held that the presumption of resulting trust applies to a transfer from a parent to an adult child. I have more information here.]

Unfortunately, employees of financial institutions are not always aware that the banking documents are not determinative of the rights between the deceased contributor’s estate and the surviving joint account holder. This may affect the advice they give to their customers on joint accounts.