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Joint accounts and estate planning

Associate Portfolio Manager and Senior Investment Advisor Jonathan Grant discusses the intricacies of account ownership in Joint Tenancy with Right of Survivorship

Account ownership in Joint Tenancy with Right of Survivorship or JTWROS is a common way to hold accounts that are often used by family members for estate planning purposes. The term joint tenancy refers to a legal ownership structure involving two or more parties for any type of financial account.

Jonathan Grant is an Associate Portfolio Manager and Senior Investment Advisor with the Grant Wealth Management Group at TD Wealth Private Investment Advice in Orillia. Jonathan says, “A JTWROS is commonly used between married couples, or between a parent and their child. But such an account can be established between parties who are not related.”

Generally, if an individual who holds property jointly with another person, then passes away, the entire interest in the property passes to that other person. This is known as the “right of survivorship.”

Things to consider when transferring accounts into joint ownership

With a JTWROS account, each joint owner has an undivided interest in the whole property. When a joint owner dies, that person’s interest automatically transfers to the remaining joint owner or owners. Jonathan says, “The property does not form part of the deceased’s estate and should not be included in the value of the estate for probate purposes.” In Quebec, Common Law estate planning strategies involving JTWROS do not apply.

If the account holder documented who should get the money upon their death, the decision is clear. When there is no documentation, consideration is typically given to common law principles. When assessing the intention of the party that transferred the property into a JTWROS, courts have traditionally relied on certain presumptions as a guide. Jonathan says, “historically, the presumption of resulting trust and the presumption of advancement come into play when the beneficiary of money held in a joint account is being disputed.”

Presumption of resulting trust

Based on this presumption, unless the evidence proves otherwise, if a parent deposits all the money into an account held jointly with an adult child, then it’s presumed the money would be held in trust for the deceased parent’s estate.

The presumption of resulting trust presumes that a party who receives property without paying for it holds it on a resulting trust for the party who paid for it.

In this case, the child holds the account in trust for the parent and the parent remains the beneficial owner of the account. Jonathan says, “The presumption of resulting trust means that it falls to the surviving joint account holder, in this case the child, to prove that the deceased parent intended to gift the right of ownership to whatever assets are left in the account to the child.”

Established by a decision of the Supreme Court of Canada, it is presumed that the property was meant to remain with the estate of the deceased, not passed on to the child. “Jonathan says, “it’s important to remember that the presumption of resulting trust only applies to transfers to adult children. It does not apply to minor children under 18 years of age.”

Rebutting the presumption of resulting trust

If the presumption of resulting trust applies, the onus is on the adult child to refute the presumption and prove that the transfer was intended to be gift. If the parent did not document their intention, the child would have to produce evidence such as power of attorney, bank documents and tax treatment of the account.

If the surviving account holder cannot meet the onus and rebut the presumption, they will be found to hold the property in trust for the deceased.

Presumption of Advancement:

The presumption of advancement depends on the relationship between the parties and typically applies in property transfer between spouses or between parents and minor children. The presumption of advancement presumes that a transfer from a married person to his or her spouse is a gift. The determining factor is the transferor’s intentions. Jonathan says, “the presumption of advancement is an evidentiary assumption that applies between married spouses when a husband gratuitously transfers property to a wife, or when a parent gifts property to a minor child.”

When determining a transferor’s intentions in a presumption of advancement, the court considers the same evidence that it considers in a presumption of resulting trust case.

In general, three estate scenarios arise from JTWROS ownership arrangements between parents and their adult children, each producing a different result. Jonathan says, “this reinforces the importance of seeking professional guidance when undertaking estate planning.”

Scenario 1- A genuine JTWROS arrangement

In this JTWROS arrangement, if the parent intended to transfer both the “legal” and “beneficial” ownership for income tax purposes it could result in a capital gain or loss at the time of transfer. However, going forward both parent and child will each be liable for one-half of any future income produced by the account including capital gains.

Jonathan says, “with a genuine JTWROS arrangement, the child has identical rights to the parent, including the right to withdraw funds and receive income from the account.”

The parent will no longer have full control over property decisions and the child’s property interest will be exposed to creditors, which could include an estranged spouse. Jonathan says, “If the parent passes away, the parent’s interest in the account will automatically pass to the child via the right of survivorship. Because it would bypass the parent’s estate, probate taxes would be avoided. However, a deemed disposition of the parent’s remaining interest in the account may result in capital gains tax.”

If the child were to die first, their interest will automatically pass to the parent via the right of survivorship. If it’s not the parent’s intention, they could consider other options.

Scenario 2 – A resulting trust JTWROS arrangement

In this scenario, while both parent and child are joint owners, it does not give the child the right to access capital or receive income for their benefit. There would be no unwelcome tax consequences either.

Jonathan says, “upon a parent’s death, their beneficial interest would be held by the child on behalf of the parent’s estate, to be distributed according to the parent’s will or rules of intestacy and could lead to capital gains and probate taxes.” If the child dies first, the child’s legal interest in the account would automatically revert to the parent.

Scenario 3 – A gift of “right of survivorship” arrangement

A third arrangement is the concept of a gift of the right of survivorship. This arrangement also does not offer the child an immediate beneficial interest in the account. While named jointly with the parent, the child would have no right to access capital or receive income for their own benefit.

However, the child’s right of survivorship will give them full legal and beneficial ownership of the account upon the parent’s death. Jonathan says, “the parent will be solely liable for income tax owed, and a gift of the right of survivorship will bypass the parent’s estate, potentially reducing probate taxes.” If the child dies before the parent, the child’s right of survivorship ceases, and probate and income taxes are not applicable.

Is JTWROS an effective planning tool?

Given multiple outcomes, joint ownership can be quite complex. Jonathan says, “converting an account into a JTWROS can be an effective tool to help minimize or avoid probate taxes and to simplify the administration of an estate.”

But there can be disadvantages as well such as tax implications, exposing an account to family law or creditor claims, and the account may end up in unintended hands. In the preparation of an estate plan communication is important to minimize potential family disputes.

Jonathan Grant would be happy to offer his professional advice to help guide you through the estate planning process to ensure that your intentions are met.  Contact him today at (705) 330-0067 or [email protected].


The views expressed are those of Jonathan Grant, Associate Portfolio Manager and Senior Investment Advisor with Grant Wealth Management Group as of February 3, 2023, and are subject to change based on market and other conditions. Grant Wealth Management Group is part of TD Wealth Private Investment Advice, a division of TD Waterhouse Canada Inc. which is a subsidiary of The Toronto-Dominion Bank.