JOINT OWNERSHIP IN ESTATE PLANNING

Transcription

1 JOINT OWNERSHIP IN ESTATE PLANNING Holly Ann Knptt. Knott & Vackson /M1S.220'SfdAve. S, seskatoon; Sask. $71( Ph: 664:6900 Fax: 663'4599 SIOGRAPHICALINFORMATION... Holly Ann Knott.~..,-Holly Ann earne~ a B,A.Jrom the U~i~erslty of- Sas~atchewan in,1973,and an' LL.B. in 1974, also from th:e,, Univer~ity':qt Saskatchewan. She w*if called tq 'the Saskatc,ti~w~ri_8adn1 ~15, 'HoIIYAnn pra:ctit:~s mainly \. in the area:of family law. She d~lsigried_the LJnifled Family,qo\Jrt pllol proje-c~ worki,ng with -th~ 'piovinchh.,and.fe9e;1ral governments 19 get it fuode'd as-a 3 ye,i(pil.9:t projept Frdll'l 19$)3 ~:j995, Holly Ann was chair.-; qf 1I:te'CBAFamlly,Law:and A,lterna.t!;lDisP!Jte Resolution (North) secition;' in 1'993 shewas appointed chair, of the Legal, Aid Revie:w: Committee,_.In 1994.,she 'yvas_ Go-chair, of SKLE;~W$ "Chan'glng~ Family" law., Practice~' ~eiill"ar. HoUy Ann!s a partner In the,firm Kn_9tt &' 'Jackson,iii Saskato0l). :.',-,',-,;, ", )

2 JOINT OWNERSIDP IN ESTATE PLANNING I. IS IT JOINT OR NOT? As Allan Haubrich has pointed out, Part II of the Statement of Property (Form No. 104) is sworn to by the executor or administrator in applying for probate. A worthy goal of estate planning is to minimize probate fees by minimizing the estate assets which must appear on Part 1. (This goal has become even more important in those jurisdictions in which the rate of probate fees levied makes them appear to be almost a fonn of taxation, reminiscent of succession duties and inheritance taxes.) Of the 5 categories of assets to be declared on Part II, the first is "Property Held Jointly (with right of survivorship)ii, Obviously, property held as tenants in common will not qualify. However, when it comes to bank. accounts, it is not always so easy to detennine if a bank account is truly jointly owned with right of survivorship, or not. Just because property has been put into joint names, does not mean that the second person, who has not made any contribution has received a gift. Unless there is a special relationship between the benefactor and the recipient (such as there is between husband and wife or father and child) the operative presumption is that the property is held on a resulting trust for the benefactor. However, where there is a special relationship, including one in which one person stands in loco parentis to the other, the presumption of advancement assumes a gifting intention. (There still may be sexism in these presumptions, as husbands are presumed to advance to their wives, but the contrary is not true. Similarly, equity does not recognize a mother's obligation to provide maintenance to her children, so the presumption of resulting trust would govern. I do not pretend to have researched this issue, but I point it out for your consideration. Check the text books such as Law of Banking, Fourth Edition by Ian F.G. Baxter, Carswell, 1992.) Each of these presumptions is rebuttable by evidence to the contrary.

3 -2- Does the agreement with the bank which the parties sign on opening the account regulate the ownership of a joint bank account? Not usually. The sisters in Niles v. Lake, [1947] S.c.R. 291 opened a joint account and signed an agreement which included a survivorship clause. The Supreme Court of Canada held that, while the agreement governed the relationship between the bank and the parties and. it pennitted the bank to payout the balance to the survivor, it did not, without further evidence, indicate that the agreement was to govern the parties' relationship to each other. The survivor, therefore, held the money in a resulting trust for the deceased's estate. I have previously cautioned my clients that a joint bank account with right of survivorship may not really grant them the rights they planned on. I have not gone further to draft documents to stipulate what is to happen to the beneficial interest. Maybe this would be prudent practice. Or is it necessary, when their wills also provide for one to inherit from the other? Usually, my clients have been married couples who have joint bank accounts with every intention that the partner will benefit. And in such a situation who is likely to challenge that assumption? The problem cases have arisen where the actions of the parties in creating a joint account could support either an intention to effect an informal power of attorney, or an intention to effect a gift of the balance of the account. And these cases always seem to arise when one of the parties has died and cannot speak for him or herself anymore. Baxter in his text suggests that a gift of a chose in action (which a bank account is) may be made by a declaration of trust, as was done successfully in Whittington v. Whittington (1954),106 A. 2d 72 when a father opened a joint account and stated in the bank book "L.E. Whittington, Sr., in trust for himself, and L.E. Whittington, Jr., joint owners, subject to the order of either, and the balance at death of either to belong to the survivor."

4 - 3 - II. TIPS AND TRAPS OF JOINT OWNERSIDP, or SHOULD PROPERTY BE HELD JOINTLY? 1. The easiest scenario in which to recommend joint ownership is for a husband and wife, especially with regard to the matrimonial home. But even here, if one spouse is in a risky business (maybe the practice of law), consideration should be given to registering real property in the other spouse's name alone. 2. Parents seeking to avoid probate fees often ask about joint ownership for real property in the names of their children, with or without a parent's name on title as well. Where the children are minors I discourage this as it makes dealing with the land too cumbersome when the Public Trustee must approve of transactions. 3.a Even where the children are adults, and the parents may be getting to their twilight years, I undertake a detailed discussion about the irreversibility of putting property in joint names. The client may think that his son or daughter would abide by his wishes if he changed his mind and wanted title back in his own name alone, but court cases are caused by parties not being of the same mind. 3b. Or the spouse of that child may wish to leave the marriage and divide marital property, and there would be more difficulty proving that the child did not really have shareable property. 4. Of course, if the joint property is a bank account, the same drawbacks are present, plus the possibility that the co~owner could empty the account. 5. If a client has many children, it is less likely that all would be joint owners, especially of a bank account. If the client sets up joint account with one to the exclusion of others, will there be disparity between the children on death? How does one keep a balance (assuming one wants to)? I

5 -4- o have this problem also with specific beneficiaries of varieties of assets some of which may be appreciating in value and some diminishing. I try to convince my clients that there really are some good reasons to use wills to ensure all of the children get an equal share of the pot. 6. Putting assets such as stocks, bonds and mutual funds into joint names with another person can also trigger capital gains tax because of the deemed disposition of one half of the assets. 7, If land is involved. consider if there are GST implications of a deemed disposition, too. Or requirements that the parties be registered for GST purposes.