This discussion concerns joint accounts in all provinces except Quebec. The rules in Quebec are different than in the rest of Canada and the information contained in this article should be discussed with your tax advisor.
Why Have Joint Bank Accounts and Brokerage Accounts?
There are two common reasons for establishing joint accounts. First is to create an easily administrative account accessible to both parties. The second reason is as a tool to reduce probate taxes upon the death of one of the accountholders.
Issues and Pitfalls of Joint Accounts & Property
There may be negative consequences of transferring assets to a joint account that is with someone other than your spouse.
- Capital gains may be triggered if the assets are transferred to an account held with someone other than your spouse.
- You may lose control over the property and decisions may no longer be made without the consent of the other party.
- If one of the account holders becomes bankrupt the joint account will form part of the bankruptcy.
- If you as a parent have a joint account with one child but not the others a conflict may arise as the joint owner child becomes the owner of the assets.
- If there is a breakdown in the marriage an account held joint with an adult child may be divided in the divorce.
- The principal residence exemption may be compromised.
Probate & Joint Accounts
In all provinces except Quebec a probate tax may be levied on the value of the estate. This tax may be reduced or eliminated through the establishment of joint ownership with the right of survivorship. Upon death of one of the holders, the ownership fully passes to the surviving owner. However, there is typically a deemed disposition for tax purposes and the estate would be responsible for any capital gain or income on its proportional ownership of the assets. The only exception would be if the account is held jointly with your spouse, in which case there is no capital gain or loss upon transfer.
Do You Have A Question?
If you have a question about this article, please feel free to leave a comment in the box below. Your comments and questions are welcome and help others.
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{ 18 comments… read them below or add one }
how about the calculation of estate (toward a probate fee) in the case of a joint debt? Does the whole debt get deducted from the the estate (bring down the probate fee) or only 1/2 ?
@Paige: In Ontario, only real estate debts are deducted for probate purposes. If real estate is owned jointly, then the corresponding mortgage is as well.
Hello.
Im Brazilian, Im in Toronto right now, came to meet a person I met online, we ended up opening a joint account on her bank. If I leave back to Brazil without ending the joint account, what happens? Can it somehow be troublesome for me? Can she close the joint account without me here to sign the papers?
Thanks for the help.
I’m not sure what the context is. Are you still together? What was your reason for leaving (visa expired etc.).
To whom it may concern….My wife and I are moving along in years and over the years we have accumulated a nice sum of money..mostly placed in G.I.C.’S and cash saving accounts…we have Joint accounts so either of us can sign with the “suvivorship clause added”. We have a will and have namewd our two sons as Executors, both names… My wife and I thought it would be a good idea to add our two sons as “Joint” with ALL of our savings, we believe, knowing our sons as honest men, one is a Doctor, and the other one is retired with a huge pension, we, my wife and I believe during this will save them a lot of paper work and time in cleaning up our estate. The question we would love to have answered is this…What are the worst drawbacks in our thinking????Are we or did we make a mistake doing this?? or is it a good idea?? We love to have a answer to these questions…we are now in our late eighties and haven’t much time left…please answer in my website as mentioned…Thank-you. Harry
Hello Harry:
Adding your sons as joint owners adds liability to your assets. If either are divorced or sued, the joint accounts will be subject to claims of divorce or creditors. You could lose your assets.
My opinion is the joint ownership with your spouse is perfectly sound estate planning except in a few cases. With anyone else it is not suggested, and I do not feel there is any case where is should be done. There are other ways to create an efficient estate (an alter ego or joint partner trust for example).
I would suggest you ask an estate planning lawyer if you should make your accounts joint with rights of survivorship with your son’s. The lawyer will tell you the same thing. I can’t tell you you’ve made a mistake or not. That is more of a legal question and I am not a lawyer!
I guess it is now to late to undo what my wife and I have done..We did make our two sons as joint owners of all of our accounts…what can I do now to undo this situation? I was advised to do this from our Bank Manager, he said this would completely reduce any chance of the expense of probate of the will.. We understand the slim chance of one of our sons could get into some sort of trouble where they could have access to our monies, for us the chances of this would be very slim…Thank you for your advice, when you arrive at our age, worked hard all your life, raised two fine sons, we, my wife and I, would like to put everything in order before our time runs out. Should any other ideas you may have we would appreciate hearing from you.
Harry.
Harry,
You can always undo it, unless you claimed a capital gain. Get some legal advice from a lawyer and have your estate prepared properly…be sure yo tell the lawyer about all of your assets.
We never did receive an answer to our questions.
Harry
Hi….Thanks for all the advice you have given me, I really appreciate your comments…I do have another question I would like an answer to, I realize that you are not a lawyer, but you might know the answer. We want to make a few changes to our will , as our will needed to be updated. The problem is that the lawyer which did the the will has since died and I had to select another one in our area…I gave him our wills and all the papers attached with it, in his return letter he asked me for another form which I haven’t got..”affidavit of execution”. This lawyer claims I sure have this form with my will in order to probate our will…first I haven’t got this form, never had it, and I am under the impression that…All wills are not probated in court, only a will which contains a huge anount of assess… and he wants one of the original witness which signed our original will…well, both witness has gone from the area after their lawyer died, one is in China, the other one moved to Florida..to sign another one should I not have the original..I never had one in the first place. Now what do I do?? I know I am asking you for a lot of information, but I do have a meeting with this new lawyer next Thursday. In your opinion, what do you suggest??
Thanks a lot. Harry
Hello Harry,
Just tell the lawyer you can’t find it and you’re now sure which of your past lawyers has it.
Your new Will should have a general clause to revoke all previous Wills. He may want to just update your existing Will. A new one will cost you a little more. It shouldn’t be a major hitch.
Thanks for everything Tax Guy.
One question, can we delete the messages I wrote to you????? I would like it to be private…
How do I remove my deceased son’s name from a joint account
that included myself and my daughter.
Contact your bank or financial instituion and ask what there requirements are.
With a joint investment account, who is taxed on any capital gains or dividend income?
Thanks
Jason,
It depends on whose funds were contribute to the account and the relationship between the parties.
I share a joint GIC account with my father who is now deceased. It comes up for renewal in 8 weeks. If I chose to cash out in 8 weeks, can my father’s estate receive the tax on the interest for the past year or do I have to put through on my taxes?
Allie,
When your father passed away, he was deemed to have disposed of the GIC at fair market value on the date of his death. The interest accrued to that date was taxable to him and the interest from that point forward is taxable to you.