Sharing a joint bank account with your elderly parent? Here’s what you need to know. 

Last Updated on October 9, 2024 by Shayna Beeksma

Disclaimer: This article discusses Estate Planning.  It is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

As your parents get older, you tend to step in and handle more day-to-day tasks for them. Maybe it’s booking appointments and coordinating their medications. Maybe it’s more involved, including managing their finances. 

For many families, sharing a bank account with a parent can be convenient for managing finances and help you care for your parent’s needs. You may also think that it can help you avoid probate fees later on. 

However, are there any risks and potential legal complications that you need to know about? What happens when your parent passes away? How is that joint bank account treated as it relates to their estate? 

We will answer those questions in this article and discuss ways to minimize those risk for parents and their children. For more information, we encourage you to reach out to our team for a complimentary call. 

What does the law presume about a joint bank account with an elderly parent?

Suppose a parent adds their son or daughter to their bank account. When that person dies, the law typically presumes it to be a resulting trust rather than a gift.

What is a resulting trust? It is a legal concept where one party holds property for the benefit of another. Adding a joint owner does not give the recipient full ownership; rather, the trustee holds the property in trust for the original owner.

What does this mean in the context of joint bank accounts? The courts will presume that the money in the account was to be held by the adult child in trust for the parent, not as a gift. The child is expected to manage the funds for the parent’s benefit, and the funds remain part of the deceased’s estate.

This presumption of resulting trust can only be overturned with clear evidence that the parent intended the funds as a gift.

What are the risks of having a joint account?

Both elderly parents and adult children face significant risks when creating joint accounts without proper documentation:

The parent’s intent could be misinterpreted.

Without explicit documentation, there can be confusion about whether the account addition was meant as a gift or a trust arrangement. This can lead to disputes among family members after the parent’s incapacitation or death. The adult child could claim that the funds were held jointly and meant as a gift (perhaps because they acted as a caregiver or other reasons), while other siblings or beneficiaries might disagree. This can result in a costly estate litigation process.

If the funds were intended as a gift and weren’t documented, they could become part of the parent’s estate.

If the funds were intended as a gift, adult children must ensure there is clear documentation, such as a gift acknowledgment, to support this claim. Without such evidence, the court is likely to presume that the funds were held for the benefit of the parent and should form part of the estate.

If the court determines that the account is a trust and should be part of the estate of the deceased, the adult child could lose access to those jointly held funds and no longer be one of the account holders. They would be required to return the money to the estate, which would then be distributed according to the parent’s will or probate laws. 

This outcome would be less than ideal for the adult child, especially if they believed the money was rightfully theirs. Additionally, the legal process to resolve such disputes can be lengthy and costly, adding further strain to family relationships and financial resources.

How can you avoid these pitfalls?

Simply put, make sure to clearly document the parent’s intentions. 

If the funds are a gift…

If the parent intends to gift the funds in the account to their child, they should create a gift acknowledgment. This document clearly states that the funds are a gift, helping to prevent disputes later on.

If the funds are not a gift…

If you are to manage the account on behalf of your parent, have a lawyer draft a trust agreement. This agreement should outline that the funds remain the parent’s property and are not a gift.

Either way, engage a lawyer to draft these documents and ensure they comply with legal standards. This investment can save significant time, money, and emotional stress in the future.

Minimize your risks with strategic estate planning. Contact Beeksma Law today!

Proper estate planning and clear documentation can significantly reduce the risks associated with joint bank accounts between you and your parents. At Beeksma Law, we specialize in helping families navigate these complex issues and ensure that their intentions are honored. Whether that is drafting your will and powers of attorney (POA) or advising you on estate administration as a trustee, we are here with strategic, personalized legal advice. 

Note: There are new tax rules relating to joint account holders, new trust reporting rules and bare trusts that the CRA (Canada Revenue Agency) announced in March 2024. We encourage you to speak to your tax advisor regarding these changes. 

Contact us today to discuss how we can assist you in creating a strategic estate plan that protects your interests and maintains family harmony.