In a recent article in Maclean’s magazine – Signing Away Your Savings – author Risha Gotlieb states: “Joint bank accounts are inceasingly being used as a vehicle to defraud Canadian seniors”.
Estate practioners, undertstandably, tend to focus on the problems which can arise on the death of the parent (generally the first joint owner to die). All too frequently, the death results in a fight between the surviving joint owner, who may argue the account now belongs to them, and their siblings who believe the account should form part of their deceased parent’s estate.
This article focuses on the more immediate threats. We are told that aging parents often add adult children to their account for “convenience” – joint tenancy may be seen as the simplest means of assisting the parent with bill payments and other financial transactions.
Unfortunately, once the account is transferred into “joint tenancy with right of survivorship”, the child becomes a co-owner of the account. This means the child has the same withdrawal and cheque-writing privileges as the parent. A couple of examples of what may happen are cited. In one case a daugther withdrew $200,000+ over an 18 month period. In another, grandchildren are alleged to have absconded with $650,000. A transfer into joint tenancy may also have the effect of exposing the account to the child’s creditors and/or their spouse in the event of marital breakdown.
I was pleased to read that Canada’s ombudsman for banking services and the banks are taking notice and now recognize the need to educate both staff and customers on the pitfalls of joint tenancy. Both groups need to know that joint tenancy represents a dangerous shortcut and is simply no substitute for proper planning. The preparation of a Will and Continuing Power of Attorney for Property – through which you appoint trustworthy and accountable parties to act on your behalf – remain, as always, the best planning options.
Thanks for reading.