Resulting Trusts - What you need to know about joint bank accounts
It’s common for a parent to add an adult child to their bank account as a joint owner, often for convenience or to help manage finances. You might assume that doing so also means that your child will automatically inherit that account after your death. It’s important to know that’s not necessarily the case, and this arrangement can lead to unintended consequences and disputes if it’s not handled properly.
What Is the Presumption of Resulting Trust?
In Canada, when a parent adds an adult child to a joint bank account, the “presumption of resulting trust” applies. This means the law assumes the child is holding the money in trust for the parent’s estate, unless there is clear evidence that the parent intended to gift the money in the bank account to that child.
Even if the bank account’s terms include a right of survivorship (meaning if one account holder dies, legal ownership automatically passes to the surviving account holder), that doesn't necessarily mean the child is entitled to keep the money. They may be required to return it to the estate, and it would then be distributed in accordance with the parent’s will.
This principle was confirmed by the Supreme Court in Pecore v. Pecore, 2007 SCC 17 and is a key issue in many estate disputes.
How to Show Intent If You DO Intend to Leave the Money to the Joint Owner
To override the “presumption of resulting trust”, the child who jointly owned the account must show that the parent intended the funds in the bank account to be a true gift to that child. Evidence might include:
A written note or declaration from the parent;
Instructions in the parent’s will; or
Statements made by the parent to professionals or other family members.
Without such evidence, the funds may be treated as part of the estate. This can be particularly problematic if the child has taken money from the account, assuming that it belongs to them, only to find out later that the money isn’t theirs and needs to be returned.
Planning Ahead
If you’re thinking about adding a child to a joint account—or if you’ve already done so—it’s important to:
Clearly document your intentions;
Understand the legal implications; and
Consider alternatives, such as a power of attorney.
Joint accounts can be helpful, but they can also lead to disputes among family members if not handled properly. To protect your intentions and your loved ones, it's best to get legal advice before making changes.
If you have any questions about joint accounts or would like to discuss your estate planning, please contact us to schedule a consultation.
This blog post is for informational purposes only and is not intended to provide legal advice. If you require legal assistance, before taking any action you should contact us or another qualified lawyer to discuss your situation.
