All About Estates

Joint accounts – continued

Several years ago, I wrote about probate planning involving the use of joint accounts. At the time, my father-in-law had just passed away and my mother-in-law, who survived him, was intent on paying the least amount of Estate Administration Tax (EAT).

Jointly held property with a spouse or with one or more children, with a right of survivorship may not form part of the deceased’s estate and may be effective to achieve a one-time EAT saving – the good. On the other hand, without a clear understanding of intention, the parent may have created a misunderstanding between siblings and a tax liability that is sooner than expected. Let us use an investment account as an example for purposes of this blog.

A parent who adds a child’s name to a bank account has made one of a current gift to the child, a bare trust arrangement to hold the property (with no change in beneficial ownership), or a promise that the account goes to the child on the death of the parent. All approaches would appear to avoid EAT – the good. A current gift will trigger current tax on any accrued gains – the bad. Without clear documentation on intention, there may be a misunderstanding among the siblings as to who inherits the account – also the bad.

The restructuring of her affairs post death of my father-in-law has served its purpose and allowed for the carveout in determining the EAT for the estate of my mother-in-law who recently passed away. Thankfully, she was clear in her intentions and there is not likely to be any misunderstanding among the beneficiaries of her estate.

About Derek de Gannes
Derek A. de Gannes: Senior Director, Private Client Services of RSM Canada. RSM Canada is committed to the highest level of integrity, quality and professionalism and provides clients with solutions in the area of Audit, Tax and Transaction Services. Email: derek.degannes@rsmcanada.com

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