All About Estates

‘Til death do us part … the bank accounts: A warning for common-law couples

This Blog was written by: Kristie Smith, Estate and Trust Consultant, Scotia Wealth Management 

Summer is upon us, in all its glory. After a pandemic hiatus, my calendar is dotted with weddings to attend for friends and family members. But is this summer spectacle going the way of the dodo?

I don’t think so, but marriage is certainly on the decline in Canada. Statistics Canada reported last year that 2020 saw 98,355 marriages in Canada – the lowest number since 1938. Although the pandemic no doubt played into this, the trend set in long before social distancing: the crude marriage rate has been declining in Canada since 1972.[1]

Meanwhile, common-law relationships in Canada are taking flight. From 1981 to 2021, the number of common-law couples in Canada increased by 441%.[2] Twenty-three percent of couples in Canada are common-law, with a particular prevalence in both young adults (79% of couples aged 20-24) and older couples (16% of couples aged 55-69, up from 13% in 2016).[3] Common law relationships are particularly common for blended families: “among couples with children, those in common-law relationships were four times as likely to be stepfamilies (31%) as their married counterparts with children (7%)”.[4]

And yet, the law is still figuring out what it means to be common law: which of the rights afforded to legally married couples apply to common law spouses, and which do not.

In the estate planning context: a married spouse may have rights under family law legislation with respect to possession or even ownership of the family home, or division or equalization of property on death; a right to receive an inheritance under the laws of intestacy; and/or a right to claim dependent’s relief if not adequately provided for in a will. Meanwhile, a common law spouse likely has no right to a family (matrimonial) home and likely will not share in an intestate distribution. He or she will have to hope that the Chancellor du jour has a long foot.

The Newfoundland and Labrador Court of Appeal in Edgecombe v. Nicholas[5] recently waded into this murky landscape, to address a common DIY estate planning technique / will substitute: the joint bank or investment account.

Adding another person’s name to one’s bank account is not, in and of itself, sufficient to conclude that the owner intended the other receives the funds remaining in that account.

Where an account is funded by one person but held jointly with another, the right of survivorship vests legal title to the funds in that account in the surviving co-owner after the death of the other. But the beneficial title may or may not follow. Whether that gratuitous transfer constitutes a gift is determined by the intention of the deceased – and, more to the point, the ability of the surviving co-owner to prove that intention after the death.

To assist with identifying the deceased’s intention, the law makes certain presumptions. For married spouses and adult children, these presumptions are settled in law. Where a person adds his or her legally married spouse, the law presumes the funds are intended as a gift to the survivor (the ‘presumption of advancement’). Where a parent adds an adult child to the account, the law presumes a resulting trust: that the funds are to be distributed as part of the estate (i.e., per the will). These presumptions can be rebutted by evidence demonstrating that the deceased intended otherwise.

The Edgecombe decision gave the Court an opportunity to consider this in the increasingly common blended family scenario of surviving common-law spouse vs. children of first marriage.

In Edgecombe, the Court considered who should receive the proceeds of four bank and investment accounts amounting to some $1.4 million, held jointly between the deceased and his common law spouse: the common law spouse of nearly 40 years, or, if the funds fell into the residue of his estate, the spouse and the deceased’s five children (three of whom were estranged from their father; one who had infrequent contact; and one who maintained contact) in equal shares. Of note, the estate (excluding the accounts) amounted to over $4 million.

The Court of Appeal decided that the presumption of advancement does not apply to common-law spouses. [6] In this case, however, it found the common law spouse had rebutted the presumption of resulting trust. She kept the proceeds of the four accounts.

The cost of these disputes quickly exceeds any possible probate fee savings, not to mention the emotional costs of such rifts in the family, prolonged delays (Edgecombe was decided nearly a decade after the death) and the risk of unintended outcomes for beneficiaries.

If jointly held assets, including bank or investment accounts, real property, or other assets, form part of your estate, ensure they form part of your estate plan as well. A clear and properly documented estate plan is crucial to ensuring that your beneficiaries receive their intended inheritances, particularly with a ‘non-traditional’ family.





[3] Ibid.

[4] Ibid.

[5] 2023 NLCA 19

[6] This decision, of course, is limited to the province of Newfoundland and Labrador, but could be persuasive to other provinces and territories.

About Scotiatrust

1 Comment

  1. Ian Keay

    August 3, 2023 - 4:46 pm

    A very useful commentary. Thank you.

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