Sunday, May 20, 2007

How Can Financial Institutions Help Avoid Joint Account Disputes?

This is my tenth part in a ten part series on the Supreme Court of Canada decisions in Pecore v. Pecore, 2007 SCC 17, and Madsen Estate v. Saylor, 2007 SCC 18. Both of these cases were disputes about joint accounts. In each case, a father transferred investments into joint accounts with a daughter. On the father’s death, the daughter claimed ownership of the balance in the accounts by right of survivorship as against the father’s estate. In Pecore the daughter was entitled to keep the funds. In Madsen Estate the daughter was not.
There is very little on the facts to distinguish these cases.

The Supreme Court of Canada clarified the law in a couple of respects in these cases by abolishing the presumption of advancement in transfers from parents to adult children, and by deciding that joint accounts are not testamentary. But the Court did not, and could not, settle these disputes once-and-for-all. The problems associated with joint accounts will keep estate litigation lawyers employed for a long time to come. These disputes have to be decided on the facts.

How can financial institutions help avoid these disputes?

First, financial institutions could offer a variety of different kinds of accounts to meet different needs. There could be accounts that allow for two people to access the account, either separately or together, that provide on the death of the contributor, the account belongs to the contributor’s estate. This type of account would be useful where the contributor wishes for a child or other person to access the account for convenience only.

Secondly, financial institutions could provide pamphlets explaining in a general way the difficulties that these accounts may create.

Thirdly, financial institutions should encourage their clients to get legal advice from estate planning lawyers before transferring significant assets into joint accounts with children or others. But, the lawyers need to also take the time and responsibility to give advice about joint accounts.

Finally, and most importantly, financial institutions should prohibit their employees from giving legal advice about joint accounts. Most employees of financial institutions are not qualified to give legal advice about joint accounts. Yet, I have had clients tell me that their banks have told them that joint accounts are a good way to avoid probate fees. This is often bad advice. If financial institutions continue to allow their employees to give legal advice, then they should be held accountable in negligence for the consequences of their advice.

My previous in this series were as follows:

In my first post, I summarized the facts of these cases.
In my second post, I wrote about the presumptions of resulting trusts and of advancement.
In my third post, I wrote about how the Court dealt with the issue of whether a gift of a right-of-survivorship is testamentary, requiring compliance with wills legislation.
In my fourth post, I wrote about the Supreme Court of Canada has relaxed the rule against evidence of statement and acts after a transfer has occurred.
In my fifth post, I wrote about the joint account documents.
In my sixth post, I wrote about the relevance of whether the contributor of the joint account continued to use and control the account during his lifetime.
In my seventh post, I wrote about the significance of whether the contributor also appointed the other account holder as an attorney under a power of attorney.
In my eight post, I wrote about the relevance of who paid the taxes in joint account disputes.
In my ninth post, I wrote about the importance of legal advice about joint accounts.

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