How to Properly Document a Transfer into Joint Tenancy

I have preached caution about the use of joint tenancies as an estate-planning tool to transfer wealth often from a parent to a child, or sometimes to some other relative or friend,. One of the first blog posts I wrote back in September, 2005, was entitled “Six PotentialPitfalls Parents Should Consider Before Transferring Real Estate Into a JointTenancy with Their Children.” There are in fact more than six, and I won’trepeat them all here. Instead I want to focus on how to properly document atransfer into a joint tenancy when the transfer is done as part of an estateplan.

Usually when I write about lawsuits concerning either land held in a joint tenancy, or joint bank or investment accounts, the problem is that the person who made the transfer or contributed the funds did not clearly document her intent at the time of the transfer. There is a presumption that when Mary transfers to her house into a joint tenancy with her daughter Jane for free, she does not intend to make a gift, and that Jane holds her interest on trust for Mary, and for Mary’s estate when Mary dies. This is called the presumption of resulting trust. But it is just a presumption, and there may be evidence that Mary intended to make a gift, rebutting the presumption. Disputes may arise in at least a couple of different circumstances. Mary and Jane have a falling out, Mary sues Jane for the title back, and Jane claims ownership of a half interest on the basis that Mary did intend a gift when she transferred the title. The second, and more common, kind of dispute occurs after Mary’s death. Jane claims the house by right of survivorship as the surviving joint tenant. Her brother Mark, who is also a beneficiary of Mary’s will says that Mary intended for Jane to share the house with Mark in accordance with the distribution in Mary’s will. Mark sues, claiming that Jane holds title to the house on trust for Mary’s estate.

The cases come down to a search for Mary’s actual intent. All too often in those cases that go to trial, the lawyer or notary has not documented his or her meeting with Mary very well. This is not to suggest that the majority of lawyers and notaries do a poor job documenting their files, but usually when the file is well documented, the dispute is resolved well before trial. In the case of joint accounts, lawyers are generally not involved in setting up the account, and unfortunately legal advice is sometimes given by well intentioned, but ill-informed employees of financial institutions without legal training. The only documentation is often the financial institution’s forms which do not illuminate the issue well.

Because disputes involving well-documented transfers of title into joint tenancy usually do not make it to trial, it is rare, but refreshing to see a case in which the lawyer handling the transfer did an excellent job of documenting the transaction and the transferor’s intentions.

Carvel Weaver transferred most of his financial assets into joint accounts with his cousin Vivian Storey and transferred title to his home on Hornby Island into a joint tenancy with her. He made a will in which he left his three surviving children, $5000 each, and Ms. Storey the residue of his estate.

After his death on July 24, 2014, two of his children sued to vary his will on the basis that he had not made adequate provision for them. They also made other claims in respect of his assets, including a claim that Ms. Storey holds the Hornby Island property and other assets on a resulting trust for their father’s estate. This is important because if they were successful and the assets form part of his estate, then the court may award them a share if they are successful in their wills variation claim. But if Ms. Storey is entitled to retain the assets as the surviving joint tenant, then British Columbia’s wills variation legislation does not permit the court to vary the disposition of assets that are not part of the estate, and do not pass under the will.

Ms. Storey brought an application to court to determine whether Carvel Weaver intended to make a gift of the right of survivorship of the Hornby property and other assets to her, or whether she does hold these assets on trust for his estate. In Weaver v. Weaver Estate, 2019 BCSC 132, Madam Justice Horsman held that Carvel Weaver did intend to make a gift of the right of survivorship, and that Ms. Storey does not hold the assets in trust for his estate. The key to the decision was the evidence of Carvel Weaver’s estate-planning lawyer, Andrea Rowe, and the documents she created to implement his estate plan.

Ms. Rowe met with Carvel Weaver alone to take his estate-planning instructions. He told her that he wanted to leave each of his children $5000 and the rest of his wealth to Ms. Storey. Ms. Rowe explained to him that his children could apply to vary his will. He decided to use jointures as a method for passing his wealth to Ms. Storey outside of his estate. Ms. Rowe prepared a transfer document to transfer the Hornby property into both Mr. Weaver and Ms. Storey’s names as joint tenants. Ms. Rowe registered the transfer at the Land Title Office. Fortunately for Ms. Storey, Ms. Rowe also created a number of other documents setting out the intention. These include, a Deed of Gift and Statutory Declaration, as well as a power of attorney for Ms. Storey to sign allowing Carvel Weaver to deal with the title to the Hornby property as well as a transfer of the title back to him.

I will quote from some of the documents below, but the essential nature of the plan was that on the one hand, Carvel Weaver retained control over the Horny property during his lifetime. It was clear that for as long as he lived, Ms. Storey’s interest was limited to the title, and the right of survivorship. If he wanted to take back title or sell the property, he could do so without Ms. Storey having to sign anything further. Because her interest was limited, he could change his mind. On the other hand, it was also clear that he intended to give her the right of survivorship so that if he died before her, she became the full owner of the property, and did not hold it on a resulting trust for his estate.

Madam Justice Horseman quoted parts of the Deed of Gift and Statutory Declaration in her decision. The recitals from the Deed of Gift are as follows:

1.         Carvel hereby transfers the Land to himself and Vivian as joint tenants and in so doing makes a gift of the right of survivorship but no transfer of the beneficial ownership. 

2.         Carvel will sign all further documents and instruments as may be required to effect this transfer (including a Form A Transfer and Property Transfer Tax Form). 

3.         Carvel and Vivian will sign a Power of Attorney by Vivian in favour of Carvel so that Carvel may deal with the Land, unilaterally. 

4.         Vivian will sign a Form A Transfer transferring the Land to Carvel to be held by Carvel.

5.         This Deed of Gift constitutes the legal transfer of the Land by Carvel to Carvel and Vivian as joint tenants. By signing this Deed of Gift, Vivian acknowledges the limited interest being transferred to her.

The Statutory Declaration included the following paragraphs:

3.         Prior to making this decision, I was advised about the difference between an outright gift, creating a tenancy in common, creating a joint tenancy to transfer the right of survivorship (only) and making a gift under my Will.

4.         I chose joint tenancy to grant the right of survivorship because I want Vivian to be able to deal with my Home immediately after my death and I do not want my Home to form part of my estate. Still, I do not intend to grant any present beneficial interest in my Home to Vivian (other than the right of survivorship). 

. . . .
6.         I have required, as a condition of the transfers described above, that Vivian:

a.         grant me a limited enduring Power of Attorney so that I may deal with my Home as I decide in my absolute discretion and without interference from Vivian; and

b.         enter into a Bare Trust Agreement setting out that any interest Vivian may have in the home during my lifetime, other than the right of survivorship, is held by Vivian for my benefit.

Ms. Rowe also drafted a provision for Carvel Weaver’s will, further confirming his intent that assets including his bank accounts held jointly with Ms. Storey were to pass absolutely to her, and that she would not hold her interest on trust for his estate. The provision reads:

I declare that I am aware of the legal significance of the Right of Survivorship as it pertains to joint assets. I declare that any real estate or other assets (for instance, bank accounts) which are owned jointly with Vivian are deliberately held as such so that the Right of Survivorship will apply in the event of my death so that if Vivian survives me, she will own such assets, absolutely, and not on any resulting trust for my estate.

There are two other points that I think important. The lawyer met alone with her client in this case, and the evidence indicates that she explained the documents to him. It is important for a lawyer to make sure that the instructions she receives reflect the client’s wishes, which is why it is important to meet alone when taking instructions, and that the client understands the nature and effect of the documents he is signing (even if not all of the technical language).

I still always urge caution in using joint ownership to transfer wealth on death, but when it makes sense to do so, then intent must be clearly documented. There is more than one way of doing so, but with a significant asset such as a house, this level of documentation is often required to protect the client and the estate plan.

I should note that the decision I have discussed only dealt with one aspect of the children’s claims. They have made other claims which were set for trial. It is possible that they may prevail on some other basis.  

Zeligs v. Janes

Contests between siblings following the death of a parent over houses and bank accounts that were held jointly between the parent and one of the parent’s children are all too common. What happens is that a parent who was the sole owner her own house or bank or investment account transfers the house or account into a joint tenancy with one of her children. After death, the child takes the title by right of survivorship, but the other child or children protest. One issue that may arise is whether the parent intended a gift to the child taking an interest in the title, or whether that child holds the house or account in trust for the now deceased parent’s estate. Sometimes, another child (or other beneficiary of the parent’s will) argues that the child benefiting from the joint tenancy exercised undue influence over the parent, or that there is a presumption of undue influence that has not been rebutted.

Zeligs v. Janes, 2015 BCSC 7 is such a case, but with an interesting twist. The result ultimately turned on whether a joint tenancy was severed by the child on title before the parent died.

Dorothy Burnett lived to be 103. When she died, on April 9, 2010, she had two daughters, Barbara Zeligs, and Diana Janes.

Following the death of her husband in 1990, Ms. Burnett lived independently in her house on Knox Road in Vancouver, until July, 2001 when her daughter Diana Janes and Ms. Janes’ husband moved into the Knox Road property to assist her. Ms. Burnett wrote the following note:

July 10, 2001

I Doroty Burnett - wish to stay in my home 1757 Knox Road as long as I live & to make sure I can I asked Diana Janes to move in and stay with me as long as I live, and to be fair to Diana I made her joint owner as long as I live & full owner when I die.

Dorothy Burnett

In 2002, Ms. Burnett met with a lawyer, and transferred the title to her house, which was by far her most valuable asset, into a joint tenancy with her daughter Ms. Janes.

Ms. Burnett’s health declined, and in 2008 she moved into a long-term care facility. Ms. Janes sold the Knox Road property for $2.7 million in January 2010. By that time, Ms. Burnett was incapable of managing her own affairs, and Ms. Janes signed on Ms. Burnett’s behalf using an enduring power of attorney. She initially deposited the net sale proceeds of a little under $1.8 million (after paying off mortgages that had been placed on the title) into a joint bank account, joint with her mother.

But on the day she deposited the funds into the joint account, Ms. Janes took about $700,000 out of the joint account to buy a house, the title to which was registered in her name and that of her husband. Later, while her mother was still alive, she took out the balance of the sale proceeds from the joint account and for investments in her sole name.

Ms. Burnett’s last will, which she signed in 2003, left the residue of her estate to be divided equally between her two daughters.

Barbara Zeligs died after her mother. Ms. Zeligs’ husband, Joseph Zeligs, as her executor claimed that the proceeds of the sale of the Knox Road property belong to Ms.Burnett’s estate, and pursuant to Ms. Burnett’s will, Ms. Zelig’s estate is entitled to half.

There were three main grounds for the challenge. I mentioned two of them at the outset. There is a presumption that when one person transfers title to property gratuitously into the name of another (including into a joint tenancy) the transfer is not a gift, but the person receiving an interest in the title gratuitously, holds the title in trust (known as a resulting trust) for the transferor during her lifetime, and for her estate after death. Mr. Zeligs alleged that the transfer was not a gift, and Ms. Janes received an interest in the title and ultimately the proceeds of sale, subject to a resulting trust for her mother’s estate.

Mr. Zeligs also alleged that because of Ms. Burnett’s age, health problems and dependency on Ms. Janes, there is a presumption that Ms. Janes procured an interest in the by the exercise of undue influence. Where the presumption of undue influence arises, it is not necessary to prove that the beneficiary of the transfer actually exercised undue influence. Rather the burden shifts to the person receiving a benefit to show that it was given voluntarily, often by showing that the person conferring the benefit received independent advice.

Mr. Justice Steeves agreed with Mr. Zeligs that both the presumption of resulting trust and a presumption of undue influence applied to the transfer of the Knox Road property into a joint tenancy, but found that Ms. Janes had rebutted both presumptions. Key evidence included that July 10, 2001 note in which Ms. Burnett expressed her intention that Ms. Janes would be a joint owner during Ms. Burnett’s lifetime and sole owner after her death, and the evidence of Edward Bowes, the lawyer who handled the transfer of the title into the joint tenancy. Mr. Bowes acted for Ms. Burnett, met with her alone, and gave her legal advice. Mr. Bowes considered that she was mentally competent and acting voluntarily when she signed the transfer.

Given Mr. Justice Steeves findings, had the title to the Knox Road house remained in the joint tenancy until Ms. Burnett’s death, Ms. Janes would be entitled to the whole interest in the property by right of survivorship. The nature of a joint tenancy is such that, if one of two owners die, the interest of the first to die comes to an end, and the survivor holds title solely to the exclusion of the estate of deceased former joint owner. This is contrasted with a tenancy in common, where if one co-owner dies, her interest forms part of her estate, to be distributed to the beneficiaries of her will.

It is possible to change a joint tenancy into a tenancy in common, by severing the joint tenancy.

This brings us to the next ground asserted on behalf of Mr. Zeligs, and the one that is key to Mr. Justice Steeve’s decision.

Mr. Zeligs argued that the joint tenancy was severed either when the house was mortgaged (the proceeds of which were used to benefit Ms. Janes and her husband), when it was sold, or when Ms. Janes removed the proceeds from the joint account.

To hold property in a joint tenancy, there must be the four unities of interest, title, time and possession. Either or both joint tenants may sever the joint tenancies by ending the four unities. Mr. Justice Steeves set out the law as follows:

[162]     Beginning with first principles, it is axiomatic that four “unities” must exist before there is a joint tenancy and these describe the “need for virtually perfect equality” as between joint tenants. Any act that destroys one of the unities will bring the joint tenancy to an end. (A. J. McClean, “Severance of Joint Tenancies” (1979) 57 The Canadian Bar Review, 5; Bruce Ziff, Principles of Property Law, 5th ed. (Toronto: Thomson Reuters Canada Ltd., 2010), at pp. 336 and 342).

[163]     First there must be a unity of interest whereby the holdings of each tenant must be equal in nature, extent and duration. The second unity is that the holdings of each tenant must arise from the same instrument or act. This is the unity of title. Third, there is the unity of time that requires that the interests of the joint tenants arise at the same time. Finally, there is the unity of possession which requires that the rights of the tenants relate to the same property (Ziff, at p. 336; citing Sir William Blackstone, Commentaries on the Laws of England, vol. 2 (Chicago: Univ. of Chicago Press, 1979), ed 1979, at pp.180-2).

[164]     The parties agree that the specific test for determining whether a joint tenancy has been severed is set out in Williams v. Hensman (1861), 70 E.R. 862 (applied in Hansen Estate v. Hansen, 2012 ONCA 112). The statement of Vice-Chancellor Wood is often quoted and it refers to what are called the three “Rules” (Williams at 867, cited in Hansen Estate at para. 32):

A joint-tenancy may be severed in three ways: in the first place, an act of any one of the persons interested operating upon his own share may create a severance as to that share. The right of each joint-tenant is a right by survivorship only in the event of no severance having taken place of the share which … is claimed under the jus accrescendi. Each one is at liberty to dispose of his own interest in such manner as to sever it from the joint fund--losing, of course, at the same time, his own right of survivorship. Secondly, a joint-tenancy may be severed by mutual agreement. And, in the third place, there may be a severance by any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common. When the severance depends on an inference of this kind without any express act of severance, it will not suffice to rely on an intention, with respect to the particular share, declared only behind the backs of the other persons interested. You must find in this class of cases a course of dealing by which the shares of all the parties to the contest have been effected, as happened in the cases of Wilson v. Bell [(1843), 5 Ir. Eq. R. 501 (Eng. Eq. Exch.)] and Jackson v. Jackson [(1804), 9 Ves. 591 (Eng. Chancellor)]. …

[emphasis added by Ontario Court of Appeal in Hansen Estate]

In this case, Mr. Justice Steeves found that registering a mortgage did not sever the joint tenancy. In British Columbia, a mortgage is a charge on title, rather than a transfer of title. Nor did selling the Knox Road property and placing the sale proceeds into a joint account sever the joint tenancy. Because Ms. Janes transferred the funds into a joint account, the character of the joint tenancy did not change.

But, when Ms. Janes took the funds out of the joint account, she severed the joint tenancy. By taking the funds and using them to buy a house with her husband, and making investments in her own name, she destroyed the unity of possession. As set out by Mr. Justice Steeves:

[187]     By way of a conclusion, I find that the funds from the sale of the Knox Road property continued to be a joint asset owned by Dorothy and Diana from the point of sale and included the time they were in the joint account of Dorothy and Diana. However, once they were withdrawn from the joint account for the sole benefit of the defendants, to the exclusion of Dorothy, the unity of possession was destroyed and the joint tenancy was severed.

Accordingly, Ms. Burnett’s estate is entitled to half of the sale proceeds of the Knox Road property, to be distributed in accordance with her will (half to Ms. Janes and half to Ms. Zelig’s estate). If Ms. Janes had left the sale proceeds in the joint account until her mother’s death, she would have been entitled to all of the proceeds as the surviving joint tenant.

Joint Tenancy Risks: Re: Eng

One of my earliest posts, back in 2005, was about the potential pitfalls of a parent transferring his or her home into a joint tenancy with a child. A parent may have all sorts of reasons for putting her home, or bank account into a joint tenancy with a child. The one I have heard most often is that it will save probate fees. It might, but as I wrote almost seven years ago, the risks to the parent often outweigh any benefit.

I don’t know why when she bought a house in 1976, Ms. Eng put the title into the names of herself and her then 21 year old son Davie Eng as joint tenants. There was some suggestion that she put it into a joint tenancy for estate planning so that her son would receive it on her death. She held other real estate in joint tenancies with her other children. Perhaps it was done in recognition of his contribution to the family through his work in the restaurant she owned. Or she did so in order for him to establish credit.

Whatever the reason, fortunately for Ms. Eng, Master Scarth found after a 10 day hearing in Re Eng, 2012 BCSC 1096, that the evidence did not establish that she made a gift of an interest in the house to Davie Eng, or that she made a gift to him in 2008 when she put $184,000 into a joint account with him.

In October 2010, Davie Eng filed for bankruptcy. His trustee in bankruptcy claimed a half-interest in both the house and in the bank account for the benefit of Mr. Eng’s creditors.

Ms. Eng immigrated to Canada in 1955 from China. She was married, and had four children. Her husband had another child from a previous relationship. In 1972, she moved to Vancouver and opened a restaurant on property she bought in the 60s. Her children, including Davie, worked in the restaurant.

In 1976, she bought a house on Beatrice Street in Vancouver where she and three of her children lived. She put the title into a joint tenancy with Davie Eng. Eventually, two of the children moved out, and Davie Eng continued to live with her. The court found that she made all of the down payment to buy the house, and financed the rest of it with a mortgage. She did not need Davie Eng, who was 21 with no significant assets, on title to qualify for the mortgage.

Over the years Davie Eng made some payments to her, but she said it was only when he had funds, and that it was generally in the neighbourhood of $200 or $300 per month.

Ms. Eng denied that she intended to make a gift of an interest in the house to her son. She testified that she expected all of her children to receive an equal share from the house on her death (her husband had passed away).

Ms. Eng held other real estate with her other children, and shared the proceeds of sales with them, but in each case the other children contributed some funds to the purchase.

After she sold her restaurant, she put $183,000 out of the last installment of the proceeds into a joint bank account with Davie Eng. She denied that she made a gift, and testified that she did put it into a joint account so that her son could assist her with her banking. It should be noted that she spoke very little English, her first language being Cantonese, and that she claimed all of the interest on the account on her income tax.

The trustee in bankruptcy argued that Davie had made contributions to the house and the restaurant. The trustee in bankruptcy maintained that he did not receive his interest in the house or bank accounts gratuitously. He worked for her in the restaurant and finding and dealing with tenants for her on properties she owned. She intended to giver her son a beneficial interest in these assets. He also listed an interest in the house on various credit applications.

But, Master Scarth found that Ms. Eng had paid the purchase price on the house, and that the funds in the joint account came from the sale of the restaurant, which Ms. Eng had also purchased. She had gratuitously put title of the house into joint names with Davie Eng, and put the funds into a joint account with him. Accordingly, there is a presumption of resulting trust, which is a presumption that Ms. Eng was not conferring a gift on Davie Eng. Master Scarth found that the trustee in bankruptcy had not rebutted that presumption.

In the result, although Davie Eng was on title to the house, and was on the joint account, the beneficial interest in the house and the funds in the joint account belong to his mother. The real ownership is with her. Because the trustee in bankruptcy can have no great rights to the assets than Davie Eng, it is not entitled to take half of the joint account, or to have the house sold and half of the proceeds used to pay Davie Eng’s creditors.

Had Master Scarth found that Ms. Eng had intended a gift, the result would have been quite different.

I cannot stress the risk to a parent in a similar situation. Although Ms. Eng successfully resisted the trustee in bankruptcy’s claim, she did so after 10 days of hearings. A ten-day hearing is a very expensive proposition.

I also wonder if a creditor might successfully argue in a similar case that in extending credit to the son, the creditor relied on the fact that the son had a half-interest in the title to the house. Even if as between mother and son, the property belonged to the mother, by putting her son on the title she made a representation to anyone who searched the title that he was an owner of the property. If a creditor relied on the title, could the creditor say she is estopped, in other words prevented because of her representation, from denying her son’s interest?

What if the son had severed the joint tenancy and granted a creditor a mortgage of his half-interest. Then on default, the creditor could apply to court for an order selling the house if the debt were not repaid.

Doucette v. McInnes Reversed by the Court of Appeal

Joint accounts between parents and children in British Columbia provide lots of work for estate litigation lawyers, and lots of fodder for my blog. A recent case in point is the British Columbia Court of Appeal decision in Doucette v. McInnes, 2009 BCCA 393.

When she died in Victoria, B.C. on April 29, 2004, Mildred Lucy Doucette left surviving her four adult children: Diane McInnes, Louie Doucette, Joslin Clarke and Wayne Doucette. She owned her own home, which was worth about $240,000 at her death, but later increased in value to about $420,000, and a bank account of about $21,000. She also held joint accounts with her daughter Diane McInnes with about $230,000; a joint account with Louie Doucette, worth about $44,000; and a joint account with Joslin Clarke with $150,000.

When Mildred Doucette had made her will in October, 2000, she was estranged from Wayne Doucette and Joslin Clarke. She appointed Diane McInnes and Louie Doucette as executors. She left $5,000 to each of Wayne Doucette and Joslin Clarke. She left her house to Louie Doucette, and the residue to Diane McInnes. She later reconciled with Joslin Clarke, but not with Wayne Doucette.

Mildred Doucette also had a Registered Retirement Income Fund with $55,000. She designated Diane McInnes as the beneficiary.

Wayne Doucette brought a claim under the Wills Variation Act to vary his mother’s will on the grounds that she had not made adequate provision for him. There were two main issues at trial. First, were the surviving joint account holders entitled to the funds, or did they hold them as trustees for their mother’s estate? Second, did Mildred Doucette make adequate provision for Wayne Doucette, or should the will be varied?

When a parent contributes the funds to a joint account with an adult child in British Columbia, the law presumes that the parent did not intend a gift, but that the child holds his or her interest in trust for the parent or the parent’s estate. But this presumption may be rebutted by evidence that the parent intended a gift, in which case on the parent’s death, the child may keep the funds in the account.

An interesting fact in this case is that for most of these accounts Mildred Doucette did not tell her children that she opened the joint accounts with them. She got them to sign account cards without telling them what they were signing. She did not provide the bank with the children’s addresses for the accounts, and all statements went only to her.

Mildred Doucette treated one joint account differently. Diane McInnes knew she was on a joint chequing account with her mother to assist her, and she acknowledged that she held the chequing account for her mother’s estate.

Diane McInnes also found out about the joint account with her sister Joslin Clarke, when she went with her mother to the bank when her mother was sick with cancer, a few weeks before she died. Mildred Doucette wanted to take $50,000 out of the joint investment with Joslin Clarke, and put it into an account for Louie Doucette. Mildred Doucette said that she wanted to transfer the funds to assist Louie Doucette for the time he took off from his business to be with her. Because the investment with Joslin Clarke was not redeemable, she was unable to move the funds.

At trial Mr. Justice Metzger applied the presumption of resulting trust, and held that all of the joint accounts belonged to the estate. He found that there was insufficient evidence that Mildred Doucette intended to make gifts of the funds in the joint account. His decision is reported at 2007 BCSC 1021.

The trial judge varied the will to provide 35% of the estate (including the joint accounts) to Louie Doucette, 25% to each of Diane McInnes and Joslin Clarke, and 15% to Wayne Doucette. In varying the will in favour of Wayne Doucette and Joslin Clarke, he found that Mildred Doucette had not met her moral obligations to them. The estrangement was to a large extent her fault.

On appeal, the British Columbia Court of Appeal changed the decision to allow each child to keep the funds held jointly with that child. A key factor in the decision was the fact that Mildred Doucette kept the joint accounts secret from the children. That being the case, Madam Justice Ryan in the Court of Appeal reasoned, Mildred Doucette did not open the joint accounts (other than the chequing account) for the purpose of allowing her children to assist her with her investments. If they did not know about them, they could not assist her. This contrasts with other cases, where parents open joint accounts with children for convenience so that the children can do the banking, rather than for the purpose of making gifts to their children.

Madam Justice Ryan also considered the evidence that Mildred Doucette tried to take $50,000 out of one account for Louie Doucette, in order to make a gift to him. This was an indication that when Mildred put funds into a joint account with a child, she intended to benefit the child.

After deciding that the joint accounts (other than the chequing account) were not estate assets, the Court of Appeal varied the will to provide Louie Doucette with 70% of the estate (consisting primarily of the house and $23,000) and Wayne Doucette with 30%. In arriving at these amounts, the Court of Appeal took into consideration the amounts each child received from the joint accounts and from the Registered Retirement Income Fund. Although Diane McInnes and Joslin Clarke will not benefit from the assets in the estate, they will keep the funds in the joint accounts each held with her mother.

Avoiding British Columbia Probate Fees

In British Columbia, when the Supreme Court of British Columbia grants probate (or proof) of a will, the government collects a tax, called probate fees . These probate fees are based on the value of the assets in the deceased estate. I have described it in more detail here, but for the purpose of this article, you can assume that the tax will be approximately 1.4 percent of the value of the assets.

Most people prefer to pay less tax than more. Not surprisingly, people have come up with ways to avoid probate fees. British Columbia probate fees are a most irrational tax. This tax does not apply to all assets owned by the deceased: if the deceased has structured his or her affairs so that assets flow to beneficiaries outside of the estate (will substitutes), no tax is payable in respect of those assets.

Although avoiding probate fees is a popular topic in estate planning in British Columbia, I am critical of many of the things people do, or are advised by other advisers to do, to avoid probate fees. For example, some people will put significant amounts or all of their money into joint accounts bank accounts with right of survivorship with one of their children to avoid probate. The theory is that the parent will control the funds during his or her lifetime, but on death, the account will flow to the child by right of survivorship outside of the estate. Unfortunately, the law in respect of joint accounts is complex, poorly understood (even by the banks), and there have been no end of lawsuits over who really owns the funds in the accounts after the death of one of the account holders.

I have written about the problems that can occur if you put your home or other real estate in a joint tenancy with your children elsewhere, and will not repeat them all here, other than to say in addition to legal problems, joint tenancies can cause tax problems.

My other criticism of some of the techniques used to avoid probate fees, is that sometimes opportunities are missed for tax planning that could save your heirs substantially more money in the long-run than if they save probate fees. For example, creating trusts for your children and their families in your will can save them significant taxes on investment income earned on their inheritances. I have described this in more detail here.

I do not suggest that there are no good ways of avoiding probate fees. There are.

Recently when I was taking instructions to draft a will, I noticed that my clients had many of their investments in segregated funds. Because segregated funds are life insurance products, you can name a beneficiary in an insurance designation and the funds can flow directly to the beneficiary outside of your estate, thus avoiding probate fees. Instead of just naming a beneficiary you can name a trustee to hold the funds for other beneficiaries (see this post). The upshot is that it is possible to both avoid probate fees on the segregated funds, and create trusts for your children and their families to take advantage of testamentary trusts to minimize income tax on investment income for your children.

Sometimes you really do get what you pay for. Unfortunately, there are a lot of people giving free advice about how to avoid probate fees who do not see the bigger estate planning picture. By all means listen to what they have to say, but before you implement any of it, sit down with an experienced estate planning lawyer—one who will insist on going through your circumstances thoroughly, rather than passively implementing what someone else has suggested—and get legal advice. You should also involve your other advisers, including financial planners and accountants, in your estate planning. Each adviser can offer a different perspective.

Bill 28: Simultaneous Deaths

The proposed new British Columbia Wills, Estates and Succession Act, will reform British Columbia law in respect of survivorship when two or more people die simultaneously or within a few days of each other.

As I wrote in a previous post, lawyers frequently put clauses in wills saying that a beneficiary must survive the testator for a certain period of time (often 30 days) in order to receive an inheritance. The purpose of this clause is to prevent assets going from one estate to another in case both people die together, for example, in a car accident.

But when two people hold a joint bank account with right-of-survivorship, or hold land in a joint tenancy, then if one outlives the other for even a very short time, the asset goes entirely to the survivor, and then under the survivor’s will. If no one knows who died first, the youngest is deemed to have survived the eldest. If the two joint account owners or joint tenants have different beneficiaries in their wills, or perhaps do not have wills, then who gets the assets is determined by the hazard of which of the joint owners died first. (I wrote about this issue here.)

Similar problems can occur when the annuitant and beneficiary of a Registered Retirement Savings Plan die within a short time of one another.

Division 2 of the proposed new law reform the rules, by requiring a beneficiary to survive the person from whom he or she inherits property by at least five days. For example, if a will does not provide for a longer period, the beneficiary must outlive the testator by at least five days. If not, the beneficiary is considered to have died before the testator. Similarly, the beneficiary of a Registered Retirement Savings Plan would need to survive the annuitant for at least five days to receive the Plan benefits.

There are similar proposed rules for joint tenants or joint account owners. For example, if there are two joint tenants who die within five days of each other, then instead of the property going to the one who survived for a very short time, a one-half interest would belong to the estate of each. The effect would be that if the joint tenants had different beneficiaries in their wills, one-half would go to the beneficiaries of the will of one joint tenant, and the other half to the beneficiaries of the other.

These proposed changes will not apply to life insurance policies.

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.

The Importance of Legal Advice on Joint Accounts

Two lawsuits. In each one, a father transferred investments into joint accounts with his daughter. In each case, after the father died the daughter ended up in a lawsuit with those who benefited under the father’s will. The daughter said she was entitled to keep the balance in the accounts on her father’s death by right of survivorship. Those who benefited under the will said, “No you’re not. You must pay the funds into the estate to be distributed under the will.” They fought it out in the trial courts in Ontario. In each case, the losing side appealed to the Ontario Court of Appeal. Finally, on May 3, 2007, the Supreme Court of Canada released its reasons for judgment in Pecore v. Pecore, 2007 SCC 17, and Madsen Estate v. Saylor, 2007 SCC 18. In Pecore, the daughter got to keep the balance in the joint accounts. In Madsen Estate, the daughter did not. (These cases have given me a great deal of fodder for my blog. This is my ninth post on these two cases.)

What facts distinguished Pecore from Madsen Estate?

One of the distinguishing features in Pecore is the testimony of the lawyer who took instructions and drafted the father’s will. When taking instructions the lawyer asked him about line insurance policy and Registered Retirement Savings Plan beneficiary designations. They did not specifically discuss joint accounts. The trial judge inferred from the lawyer’s evidence that the father considered when he did the will that he already had dealt with the funds in the joint accounts outside of his estate. The court inferred that he had intended the daughter to receive the investments in the accounts beneficially by right of survivorship instead of under the will. Mr. Justice Rothstein, in the Supreme Court of Canada, said that this evidence was an important indicator of the father’s intentions.

People do not usually consult with lawyers before opening joint accounts. Yet, in some cases the joint accounts may have hundred’s of thousands of dollars worth of investments in them. The law on joint accounts is subtle and complex. Front line employees of financial institutions are not qualified to give advice on the implications of joint accounts. In many cases, the contributor’s intentions are not documented.

Usually, the only opportunity a lawyer has to discuss and advise on joint accounts is when a client comes in to make or revise a will. I think it is important that lawyers take advantage of that opportunity. The lawyer should ask his or her client if there are joint accounts. The lawyer should ask with whom. What is the client’s intention? The lawyer should then give advice about any pitfalls, and offer alternatives.

Pecore and Madsen Estate illustrate the problems that can arise when a parent puts substantial assets in a joint account with one child, but then has a will that leaves part of the parent’s estate to others. There are usually better planning alternatives, including:
1. Using a power of attorney instead of a joint account if the parent’s intention is to allow the child to assist with management only;
2. Transferring the funds into a trust (after getting tax advice) if the parent wishes to save probate fees;
3. Or, if the parent does want to give the child the right of survivorship, signing a memorandum clearly setting out the parent’s intentions.

Of course, a client is free to reject a lawyer’s advice. But, when I discuss joint accounts with my clients, I make notes of what they tell me their intentions are. Even if a client chooses to keep a joint account instead of selecting what I consider to be a better alternative, at least I will have notes or a confirming letter on file reflecting what my client tells me are his or her intentions. A lawyer’s notes may assist a court in finding the contributor’s intentions, or may assist the parties in resolving a dispute out of court.

In any case, I think it is essential for lawyers and their clients to discuss joint accounts. The cost to the client is minimal when compared to the costs of lawsuits over joint accounts.

In my tenth, and (I think) last post, in this series, I am going to discuss what I think financial institutions could do better to avoid these disputes over joint accounts.

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.

The Relevance of Who Paid the Taxes in Joint Account Disputes

In Pecore v. Pecore, 2007 SCC 17, Paula Pecore's father transferred investments into joint accounts with her. After he learned that the transfer might trigger capital gains taxes on the investments, Paula Pecore's father wrote to the financial institutions that he was “100 percent owner of the assets and the funds are not being gifted to Paula.” He continued to pay tax on the income from the joint accounts during his lifetime.

Yet, the Ontario Superior Court of Justice, the Ontario Court of Appeal, and the Supreme Court of Canada all found that Paula Pecore's father intended to make a gift to Paula. She was entitled to keep the balance of the accounts on her father's death as against his estate.

In contrast, in the companion case, Madsen Estate v. Sayor, 2007 SCC 18, the trial judge took into consideration the fact that the contributor to the joint accounts continued to treat the accounts as his own for tax purposes. The courts in that case held that the contributor's daughter had to return the funds in the joint account to her father's estate.

I find this aspect of the Pecore decision difficult. Mr. Justice Rothstein, for the majority, wrote that the trial courts could take who paid the taxes on the account into consideration, but the fact that the contributor continues to pay the taxes as though the accounts are solely his own is not determinative.

One of the things I find troubling about this case is that the father did not merely treat the accounts as his own for income tax purposes. He also wrote a letter clearly stating that he did not intend to make a gift to his daughter. Yet, the courts found a gift.

I also have difficulty understanding Mr. Justice Rothstein's analysis of the potential capital gains taxes arising on the transfer into a joint tenancy in light of his holding that the joint accounts are not testamentary. Mr. Justice Rothstein wrote that “...where the transferor's intention is to gift the right of survivorship to the transferee but retain beneficial ownership of the assets during his or her lifetime, there would appear to be no disposition at the moment of the setting up of the joint account....” In other words, the father could transfer the assets into a joint account without triggering capital gains tax as long as he retained beneficial interest (the use and enjoyment of the funds) during his lifetime.

But, as I wrote in my third part in this series, Mr. Justice Rothstein held that the joint accounts were not testamentary. They did not need to comply with the formalities of Wills legislation. This is because “...the rights of survivorship, both legal and equitable, vest when the joint account is opened....”

I have trouble reconciling the view that Paula Pecore received a beneficial interest in the right of survivorship the moment the joint accounts were created, with the notion that her father did not dispose of a beneficial interest in the accounts for tax purposes at the same time.

In the eighth part of this series, I will discuss what I consider the appropriate role of lawyers in advising clients about joint accounts.

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.

What is the Significance of a Power of Attorney in a Joint Account Dispute?

In this my seventh part in a series of posts on the Supreme Court of Canada's decisions in Pecore v. Pecore, 2007 SCC 17, and Madsen Estate v. Saylor, 2007 SCC 18, I write about the significance of evidence that the parent who transferred funds into joint accounts with a child also appointed that child as an attorney under a power of attorney. In each of these cases, a father transfered investments into joint accounts with a daughter. The issue was whether, after the father's death, the daughter could keep the balance of the accounts as her own, or had to account to the father's estate for the funds. In each case, the father had also appointed the daughter his attorney under a power of attorney.

There are two ways to approach this evidence. On the one hand, it could be argued that if the father gave the daughter a power of attorney, it would not be necessary for the father to also put funds into joint accounts with his daughter if his intent in opening a joint account was to allow his daughter have access to the account solely for convenience. The daughter could use the power of attorney to use her father's account to assist him in paying his bills, or getting cash for him. Why would he bother to open a joint account with his daughter unless he intended to make a gift of the funds in the account to his daughter? On this analysis, adopted by the Ontario Court of Appeal in Pecore, evidence of the power of attorney supported the daughter's argument that her father intended for her to keep the funds in the joint accounts on the father's death as a gift.

On the other hand, the father might have opened the joint account as another means to allow the daughter to assist him. In Madsen Estate, the majority of the Ontario Court of Appeal did not consider the power of attorney as compelling evidence that the father intended a gift.

Mr. Justice Rothstein in Pecore wrote that the court could consider a power of attorney, but it is not determinative, and the court should "use caution in relying upon it." He pointed out that the person granting the power of attorney may do so to facilitate assistance with other affairs.

I think that Mr. Justice Rothstein is right to urge caution. I know of instances where employees of financial institutions have suggested the use of joint accounts to their customer for convenience after the customer has given the financial institution a copy of the power of attorney.

In the next part of this series, I will discuss the significance of how the parties dealt with the ownership of the joint accounts for tax purposes.

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.

Joint Account Disputes: The Relevance of Use and Control

On May 3, 2007, the Supreme Court of Canada released reasons for judgment in two disputed cases about joint accounts. The issue the court addressed in each case was whether a surviving joint account owner was entitled to keep the funds in the account on the death of the other joint account owner. In each case the deceased had contributed all of the funds to the accounts. In one case, the court held that the surviving joint account owner was entitled to keep the funds. In the other, the survivor had to return the funds to the deceased’s estate.

This is my sixth post in my series on Pecore v. Pecore, 2007 SCC 17, and Madsen Estate v. Saylor, 2007 SCC 18. In this post, I will summarize Mr. Justice Rothstein’s discussion in Pecore of the relevance of the fact that the deceased’s joint account owner had used and exercised control over the account during his lifetime. In each of these cases, a father transferred funds into joint accounts with his daughter. For convenience, I will refer to the contributor as the father, and the surviving joint account owner as the daughter, but the same principles apply to other relationships.

Mr. Justice Rothstein said that the court may consider whether the father used and controlled the joint account. But, he wrote, such evidence may be of marginal assistance.

He gave three reasons. First, the fact that the father continued to exercise control may reflect the dynamics of the relationship, rather than whether the father intended to make a gift to the daughter. On the other hand, an aging father might transfer funds into a joint account to allow the daughter to manage the funds for him without intending to make a gift.

Secondly, the daughter may leave funds in the account so that the father’s needs are met even if she is entitled to withdraw funds.

Thirdly, the father may intend to give the daughter the right-of-survivorship at the time of the transfer, and still use and control the funds during his lifetime.

In my seventh post in this series, I will discuss the relevance of how the parties have treated the joint accounts for tax purposes.

You can link to one of my previous posts in this series 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.

Joint Account Documents and Disputed Joint Accounts

A father contributes the funds into a joint bank account with his daughter. They sign a joint account agreement with the bank that says that on the death of one joint account owner, the survivor is entitled to withdraw the balance. The father dies. The daughter claims the funds, but either the father’s executor, or the beneficiary of his will claim the daughter holds the funds in trust for the father’s estate. Should the court consider the joint account agreement when deciding who gets the funds?

This is one of the questions the Supreme Court of Canada considered in two recent decisions, and this question is my topic in my fifth in a series of posts on the decisions in Pecore v. Pecore, 2007 SCC 17, and Madsen Estate v. Saylor, 2007 SCC 18.

As I have previously written, in earlier decisions the Supreme Court of Canada has held that the joint account agreement with a bank sets out the rights and obligations between the account holders on the one hand, and the bank on the other. The joint account agreement does not set out the rights and obligations to funds as between the estate of a deceased joint account owner, and the surviving joint account owner.

In Pecore, Mr. Justice Rothstein said that in some circumstances the joint account agreement may provide evidence of whether the person who made the contribution intended for the joint account owner to keep the balance in the account on the contributor’s death. He wrote at paragraph 61,

While I agree that bank documents do not necessarily set out equitable interests in joint accounts, banking documents in modern times may be detailed enough that they provide strong evidence of the intentions of the transferor regarding how the balance in the account should be treated on his or her death: see B. Ziff, Principles of Property Law (4th ed. 2006), at p. 332. Therefore, if there is anything in the bank documents that specifically suggests the transferor’s intent regarding the beneficial interest in the account, I do not think that courts should be barred from considering it. Indeed, the clearer the evidence in the bank documents in question, the more weight that evidence should carry.

It would be difficult to quarrel with the point that the court may consider documents the parties signed when the court tries to find out whether the person contributing the funds intended to make a gift.

On the other hand, in practice, I question how helpful the banking documents will be, or whether the courts should give the joint account agreement much weight. I don’t think I have seen joint account agreements that make a distinction between title to the accounts, and the beneficial interest (the right to the use and enjoyment) in the accounts. I think in practice the bank documents generally say that the survivor is entitled to deal with the account, and withdraw the funds. This does not shed any light on whether the now deceased person who contributed the funds intended the survivor to keep the funds, or for the funds to be distributed according to the deceased’s will.

If the joint account agreement did provide more detail to address this issue, I question whether many people would read and understand the detail. Lawyers are not usually involved in setting up joint accounts, even when the joint accounts involve substantial amounts. I have never been asked to review a joint account agreement before it was signed. In most cases, the contributor is setting up a joint account with a close relative, whom he or she completely trusts. The joint account owners don’t take a great deal of time to read the fine print.

In my next post in this series, I will write about the Supreme Court of Canada’s discussion of the relevance of whether the contributor continued to control the joint account during his lifetime.

If you are interested in reading my previous posts on these two cases, I summarized the facts of these cases in my first post. I discussed the presumption of advancement in my second 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 third post. 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.

The Supreme Court of Canada Relaxes the Rule in Shephard v. Cartwright

The Supreme Court of Canada recently released two judgments on the issue of whether, on the death of one joint account owner who contributed all of the funds into the joint account, the surviving account owner gets to keep the funds, or must hand them over to the deceased’s estate. In each of Pecore v. Pecore, 2007 SCC 17, and Madsen Estate v. Saylor, 2007 SCC 18, a father contributed the funds to joint account with one of his daughters. In Pecore, the daughter was entitled to keep the funds. But in Madsen Estate, the daughter had to return the funds to her father’s estate.

I have summarized these cases in my first post. In my second, I wrote about the majority’s decision that an adult child who receives assets gratuitously from his or her parent has the burden of persuasion to convince a court that the parent intended to make a gift. In my third post, I discussed the Court’s decision that joint accounts are not testamentary, and the forms creating joint accounts do not need to comply with legislation governing the form of wills.

In this post, I discuss the issue of whether courts may consider what the person who has transferred assets to another gratuitously said or did after the transfer.

In these disputes between a surviving joint account owner, and the deceased’s estate, the court attempts to discover what the deceased’s intention at the time he or she transferred funds into the joint accounts. When a parent intending to make a gift transfers funds into a joint account with a child, the parent has made the gift at the time of the transfer. Once the gift is made, the parent is not entitled to take back the gift if the parent changes his or her mind. (Although, as a practical matter, if it is a joint account, the parent might be able to simply withdraw the funds, defeating the gift.)

Now, supposing two years after a mother has transferred her investments into a joint account with her son, she tells her friend that she set up the joint accounts to allow her son to assist her in managing the investments, but she did not intend to make a gift. Should a court consider this conversation after the mother has died? Perhaps, the mother intended to make a gift at the time of the transfer, but changed her mind.

What if, on the other hand, the mother tells her friend two years after the transfer that she did intend to make a gift? The statement is against the mother’s self-interest, and might be considered more reliable.

Some courts, including the House of Lords in Shephard v. Cartwright, [1955] A.C. 431, have said that in trying to find out what someone intended, the court may only consider what he or she says or does before the transfer or at about the same time as the transfer, unless what he or she says or does is against his or her own interest. Under this rule, if the mother in our example says two years after the transfer that she did not intend to make a gift, her statement would not be admissible. But, if she said that she did intend a gift she transferred the funds, this statement would be admissible even if she made it two years after the transfer.

In Pecore, Mr. Justice Rothstein held that statements or other acts showing intention were admissible even if they were made after the transfer. Such statements are admissible if they are relevant to deciding what the person making the transfer intended when the transfer was made. The trial judge can then assess the reliability and persuasiveness of the evidence.

Accordingly, the Supreme Court of Canada has relaxed the stricter rule of evidence prohibiting trial courts from even considering potentially self-serving statements of intention made after the transfer. Instead, the trial judge may hear and consider such evidence, although it might not carry as much weight as a statement made close in time to the transfer.

In my fifth post in this series, I will write about the Court’s discuss of the evidentiary value of the terms of the joint account documents.

Supreme Court of Canada Holds that Joint Accounts Are Not Testamentary

When you make a will, you are creating a document that disposes of your assets on death. Until then, you may deal with your assets as you like. You can sell them, or give them away. You can acquire more. If you change your mind about who will get what on your death, you may change your will. Your will depends on your death for its force and vigour. The gifts in your will are referred to (by lawyers anyway) as testamentary dispositions.

Sometimes the courts find that documents that one might not think of as wills are testamentary. I have written before about a document in which a creditor purported to forgive debts on his death. The court found this document to be testamentary.

So what if a court finds that a document is testamentary?

Each province in Canada has its own rules on what is required to make a valid will. In British Columbia, for example, we have strict requirements that two witnesses sign a will, and on how it is signed. If the court finds a document that is not signed in compliance with the wills legislation, the court may find that the document is invalid.

As I wrote in the first of this series of posts on last week’s Supreme Court of Canada decisions in Pecore v. Pecore, 2007 SCC 17, and Madsen Estate v. Saylor, 2007 SCC 18, in each of these case a father gratuitously transferred funds into joint accounts with a daughter. On the death of the father, the daughter claimed the funds as her own, but the beneficiaries of the parent’s estate claimed ownership.

In the Pecore decision, the daughter met the burden of persuasion that her father intended a gift to her. (I dealt with the presumptions of advancement and resulting trusts in my second post in this series here.)

The majority judgment in the Supreme Court of Canada in Pecore considered whether the joint accounts were testamentary. The argument is that the father, who contributed the funds, exercised control over the funds during his lifetime. He could effectively defeat the interest of his daughter by withdrawing all of the funds during his lifetime. If he intended that his daughter receive the funds at death, then the child’s beneficial interest (the right to use and enjoy the funds) only arose at death. The joint accounts were testamentary in nature, operating just like a will. Because the banking and investment documents creating the accounts didn’t comply with Ontario’s requirements for a valid will, the joint accounts were not a valid method for the father to dispose of the funds to the child at death. That is the argument, but not one that proved successful.

Mr. Justice Rothstein rejected the argument that the joint accounts in Pecore were testamentary. Despite the fact that the father exercised control over the accounts, Mr. Justice Rothstein held that the daughter’s right of survivorship in the accounts (in other words, the right to the funds on her father’s death) arose when the father set up the joint accounts. He transferred a beneficial interest in the accounts when he created them, and not on his death. Therefore, the joint accounts were not testamentary, and did not need to comply with Ontario’s requirements for a valid will.

In my fourth post in this series, I will write about the Supreme Court of Canada’s discussion of whether courts may consider evidence arising of the intentions of the person making the gratuitous transfer arising after the transfer.

The Supreme Court of Canada Abolishes the Presumption of Advancement in Transfers from Parents to Adult Children

In this, my second part of a series on the two recent Supreme Court of Canada cases on joint bank accounts, I discuss how the Court has changed the presumption of advancement. You can read my first post on these two cases, Pecore v. Pecore, 2007 SCC 17, and Madsen Estate v. Saylor, 2007 SCC 18, here.

By way of background, if one person transfers an asset into another person’s name gratuitously, Canadian common law usually presumes that the person who made the transfer did not intend to make a gift. If you give me a one hundred dollar bill, the law presumes that I am holding the hundred dollars in trust for you. This is referred to as a resulting trust.

The presumption of resulting trust is only a presumption. If I give you a hundred dollars on your birthday, inside a card that says happy birthday, you have some pretty good evidence that I was making a gift to you. In that case, the presumption is rebutted.

As with much of the law, there are important exceptions to the presumption of resulting trust. In some circumstances, where the person who made the transfer and the recipient are closely related, there is a presumption of gift. This is called the presumption of advancement. Historically, the presumption of advancement arose in gifts from husbands to wives, and gifts from fathers to children.

If the presumption of resulting trust applies, the recipient must persuade the court that the person who made the transfer intended a gift. But, if the presumption of advancement applies, then the burden of persuasion is on those alleging that there was no gift.

The question of which presumption applies can be significant in estate litigation cases when the person who made the transfer is deceased. If the evidence is evenly balanced, then the presumption will determine who wins.

In Pecore, the trial judge had applied the presumption of advancement to the father’s transfer of investments into joint accounts with his daughter. After finding that the presumption of advancement had not been rebutted, the trial judge held that the daughter was entitled to keep the investments.

In Marsden Estate, the trial judge had applied the presumption of resulting trust to the father’s transfer of investments into joint accounts with his daughter. After finding that the presumption of resulting trust had not been rebutted, the trial judge held that the daughter had to pay the funds in the joint accounts back into her father’s estate.

In the Supreme Court of Canada, Mr. Justice Rothstein, writing for himself and seven other Justices, held that the presumption of advancement only applies to transfers from a parent to a minor child. The presumption of resulting trust applies to transfers from a parent to an adult child.

Mr. Justice Rothstein wrote in Pecore that a parent’s obligation to support a dependant child was the main justification for the presumption of advancement in transfers from a parent to a child. Parents do not have an obligation to support independent adult children. In the case of dependant adult children, Mr. Justice Rothstein was of the view that given the different degrees of dependency, it would create too much uncertainty to apply the presumption of advancement to transfers from parents to dependant adult children.

Mr. Justice Rothstein also reasoned that a presumption of resulting trust better reflected the common practice of aging parents to transfer assets into joint accounts with children to allow their children to assist them in managing their finances.

Although Mr. Justice Rothstein held that the trial judge in Pecore had erred in applying the presumption of advancement, he upheld the result on the basis that the trial judge’s findings of fact rebutted the presumption of resulting trust.

Madam Justice Abella agreed with the result in Pecore, and dissented in Marsden Estate. She wrote in Pecore that the presumption of advancement was based on the natural affection of a parent for a child, and not just on the parent’s legal obligations of financial support. She would have applied the presumption of advancement to gratuitous transfers from parents to adult children, as well as to minor children.

The Supreme Court of Canada unanimously agreed that there is no distinction between a transfer from a father to a child and a mother to a child. Accordingly, it is clear that the presumption of advancement applies to a transfer from a mother to a minor child.

In my third post in this series, I will write about the question of whether a transfer into a joint account is testamentary in nature (will-like) when the person making the transfer intends to keep control of the account until his or her death, with the survivor then taking the proceeds of the account by right-of-survivorship.

Recent Supreme Court of Canada Decisions on Joint Accounts

Paula Pecore

Paula Pecore’s father transferred most of his wealth into joint bank and investment accounts with her. His financial adviser had told him that he could save probate fees and make transferring the investments after his death less expensive and cumbersome.

Paula Pecore’s father also gave her a power of attorney, which would allow her to manage his finances.

After he had transferred his investments into joint accounts with Paula Pecore, his accountant advised him that the transfers of investments could trigger capital gains tax. To avoid an immediate tax, Paula Pecore’s father wrote to the financial institutions advising that he was “the 100% owner of the assets and the funds are not being gifted to Paula.” He continued to pay income tax on all of the income from the investments.

Paula Pecore’s father continued to use and control the joint accounts for the rest of his lifetime. Although Paula Pecore made some withdrawals, she was required by her father to notify him before making any withdrawals.

After he transferred most of his wealth into the joint accounts, Paula Pecore’s father made a will, leaving most of his estate to Paula Pecore and her husband, Michael Pecore. The lawyer who made the will explained that life insurance, pensions and Registered Retirement Income Funds would flow to any designated beneficiaries outside of the estate, instead of as set out in the will. But, the lawyer did not discuss the joint accounts.

When Paula Pecore’s father died, the joint bank and investment accounts were worth about $1 million. He had contributed all of the funds.

Unfortunately, Paula Pecore and her husband, Michael Pecore, divorced. Michael Pecore claimed that Paula was holding the funds from the joint account in trust for the estate. He argued that Paula Pecore’s father had not gifted the funds to her during his lifetime. Although she took title to the accounts by right of survivorship, the beneficial ownership (the right to use and enjoy the funds) fell into Paula Pecore’s father’s estate, to be distributed under his will.

Does Paula Pecore get to keep the million dollar joint accounts? Or must she share them with her ex-husband under her father’s will?

Patricia Brooks

Patricia Brooks’ father transferred his investments into joint bank and investment accounts with her. Patricia Brooks father used and controlled the joint accounts during his lifetime. In fact, Patricia Brooks did not make any withdrawals from the joint account during his lifetime. Her father continued to pay income tax on all of the income from the investments.

Patricia Brooks’ father also gave her a power of attorney, which would allow her to manage his finances.

The value of the joint accounts on Patricia Brooks’ father’s death was about $185,000. He had made all of the contributions to the accounts.

Patricia Brooks claimed the funds in the joint accounts by right-of-survivorship. But, her brother and sister disagreed. Under their father’s will, he directed his estate trustee to divide his estate into two, with one half divided among his three children, and the other half among his eight grandchildren. Patricia Brooks’ siblings claimed that she was holding title to the joint accounts as trustee for their father’s estate.

Is Patricia Brooks entitled to keep the proceeds from the joint accounts for herself?

The Decisions

In Pecore v. Pecore, 2007 SCC 17, released last Thursday, the Supreme Court of Canada unanimously held that Paula Pecore is entitled to keep the funds in the joint accounts.

In Madsen Estate v. Saylor, 2007 SCC 18, also released last Thursday, in a majority decision of eight to one, the Supreme Court of Canada, held that Patricia Brooks must pay the $185,000 in the joint accounts back to her father’s estate, to be distributed in accordance with his will.

Why did the court find in favour of the surviving joint account holder in one case, but not the other? The short answer is that in each case the trial judge made different findings in of fact. In one case, the trial judge’s findings led the Supreme Court of Canada to conclude that Paula Pecore’s father really intended to make a gift of the joint accounts to her. In the other case, the findings led the majority to conclude that Patricia Brooks had not established that her father intended to make a gift of the joint accounts to her. Cases dealing with joint accounts can be finely nuanced, making prediction of the outcome of any case difficult.

These two cases, which (at least superficially) appear so much alike, highlight the continuing problems with joint accounts and other joint tenancies in estate planning. Everyday, people transfer significant wealth into joint accounts with children or others, without fully understanding the implications, or documenting their intentions. In fact, their advisors don't always fully understand the implications either. When disputes occur, it is very difficult for the courts to sort out who is entitled to the benefit of the accounts.

The Supreme Court of Canada took the opportunity in these two cases to clarify some points of law, which I will discuss in future posts.

This is the first part of a series of posts I am writing on these two cases. My next post will be on the Supreme Court of Canada’s discussion of the presumption of advancement.

Simultaneous Deaths of Joint Tenants

What happens when two people who own land in British Columbia in joint tenancy, or hold bank accounts in joint tenancy with right of survivorship, die in a common accident within a short time of each other?

Three weeks ago, I wrote a post explaining the purpose of clauses in wills or trusts requiring that a beneficiary survive the deceased for thirty days (or some other period) before the beneficiary inherits anything. In a nutshell, in the case of a common accident, this kind of clause avoids the problem of the assets of one person dying in a common accident going to the other's estate, and then everything passing under the other one's will.

In the case of a joint tenancy, we have the same problem that we would have in a will or trust that does not have a thirty-day survivor clause. If one joint owner survives the other by a short period of time, then the title goes to the survivor's estate. Or, if no one knows who died first, the youngest is presumed to survive the elder.

If both joint-tenant owners have wills providing similar distributions --as is often the case with spouses--this may not be a concern.

On the other hand, if the joint tenants have different beneficiaries named in their wills, then the joint tenancy creates a lottery. For example, supposing a mother and daughter own real estate as joint tenants. The mother's will provides that her is to be divided among her three children, with a provision that if a child dies first, that child's share goes to his or her own children. In the daughter's will, she leaves everything to her husband. If the mother dies first, or it is uncertain who died first, the real estate will go to the daughter's husband pursuant to the daughter's will. If the mother outlives the daughter for a short period of time, the real estate will fall into the mother's estate, and each of her surviving children will get one-third, and one-third will be divided among the daughter's children. This is one of the reasons I am not a fan of using joint tenancies or joint bank accounts as an estate planning tool between to transfer wealth from parents to their children.

The Succession Law Reform Project Committee in its report, Wills, Estates and Succession: A Modern Legal Framework, has proposed a change in British Columbia's legislation that would provide that in the case of a joint tenancy, if all of the joint tenants die at the same time or within five days of each other, they will be treated as though they owned the property as tenants in common. This means that the interests in the property will be divided between or among the estates of the joint tenants instead of the whole interest in the property going to the survivor.

If the law were changed as the Succession Law Reform Project Committee has proposed, then in our example, a half-interest in the property would go to the beneficiaries of the mother's will, and the other half would go to the daughter's husband under the daughter's will. This is probably a fairer result, and eliminates the lottery.

I like this recommendation.