Joint ownership of bank accounts between parents and their children is common and can be a useful tool to assist children in managing their parent’s financial affairs. When, however, a parent adds their child as a joint bank account holder to their bank account, the parent may expect the child to share the balance of the account with their siblings following the death of the parent. When the parent’s intention on the ultimate ownership of the joint account has not been made clear litigation can ensue.
The Supreme Court has considered this issue and has held that when a parent gratuitously adds their child to the parent’s bank account if ownership of the account is challenged the child registered on the bank account has the onus to prove that the parent intended the bank account to be a gift when the parent died. This is called the presumption of resulting trust. Determining the legal ownership of the account can be lengthy and expensive.
To prevent against the possibility of litigation the parent can specify in the account opening application that the bank account, instead of being jointly owned, is to be held in a tenancy in common with the child. By placing ownership of the account in tenancy in common the parent can make it clear their portion of the account becomes an asset of their estate when they die.
Another option is to have the child who is registered on the account sign a statutory declaration stating that in the event that the parent dies the child registered on the account will share the balance in the account with his/her siblings.
Written by Barrie Hayes