Joint Bank Accounts: What Happens When One Account Holder Passes Away?

It’s not uncommon for people to name a loved one, friend, or family member as a joint account holder on their bank accounts in hopes of minimizing the costs of a probate application or avoiding probate altogether. Sometimes, people name a second account holder to ensure that account assets pass to their intended beneficiary in the event that the primary account holder passes away. Well-intentioned people often add joint holders to their bank accounts, but the results of doing so don’t always match with expectations.

Clients regularly ask me about the advantages and disadvantages of adding a joint holder to their bank accounts. If you’re contemplating adding a second account holder to your bank account, or if you’re the joint holder of a deceased individual’s bank account, there are some important legal implications to consider.

Presumption of Advancement

Canadian law has historically adhered to the “presumption of advancement” principle when it comes to joint bank accounts. Under the presumption of advancement principle, the assets in a joint account are presumed to pass to the surviving joint account holder when one joint account holder dies.

The presumption of advancement principle was cause for frequent estate litigation, as people often added a child or a friend to a bank account to avoid probate or to assist with bill-payment, not intending for the secondary account holder to receive the account assets when the primary account holder passed away.

Estate Planning Realities

In recognition of this estate planning reality, the Supreme Court of Canada, in its seminal decision of Pecore v. Pecore 2007 SCC 17, held that the presumption of advancement no longer applies to joint bank accounts in most circumstances. Specifically, adding an adult child to one’s bank account will not create a presumption of advancement. Instead, adding an adult child as a joint account holder now creates a “presumption of resulting trust.”

The “presumption of resulting trust” is best illustrated by way of example. Imagine a scenario in which a parent has 3 children, all 3 of whom are named in the Will as equal beneficiaries of the estate. As the parent ages, they add child A to their bank account as a joint account holder. In such a situation, when the parent passes away, there is a presumption that child A is holding the funds in the joint bank account in trust for the estate, meaning that all 3 siblings are entitled to share equally in the account assets.

While the Pecore decision crystalizes the law in this area, it is important to remember that the presumption of resulting trust in Pecore is only a presumption, which means that it is rebuttable. If the surviving joint account holder can demonstrate, on a balance of probabilities, that the account assets were intended as a gift to them, then the presumption of resulting trust is rebutted and the joint account holder is entitled to the account assets.

It’s also important to note that there is a clear exception to the presumption of resulting trust—it does not apply to minor children. If a minor child is added as a joint account holder and the primary account holder passes away, the presumption of advancement principle still applies.

What does Pecore Mean to you?

In light of the Pecore decision, it’s important to carefully consider the legal implications before adding a joint holder to your bank accounts. We recommend that you engage in thoughtful Estate planning with a qualified Alberta Wills & Estates lawyer before making any decisions regarding joint accounts.

West Legal Is Here to Help You Develop Your Estate Plan

At West Legal, we work with clients to ensure that their Wills mirror their wishes as closely as possible. If a client is considering adding a joint holder to their bank accounts, we inform them of the law in the area, discuss the practical and legal implications of their proposed decision, and draft their Will in-line with their intentions regarding any joint bank accounts.

If you’re currently a joint bank account holder, we can help you decide whether a joint account is the best option for you. Or, if the primary account holder of your joint bank account has recently passed away, we can assist you in determining your entitlement, if any, to the account assets.