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.
Related Articles
- Why Joints Accounts Are Bad Estate Planning
- Personal Audit Trail With Multiple Accounts
- How In-Trust Accounts Work
- Joint Account With Niece Goes To Estate
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I have a joint “high-interest savings” account with my father, who is a non-resident, mixed funding into the account,
what are the tax implications?
Alex,
Since it’s mixed funded, you would be responsible for the taxes based on your proportional contribution to the account.
My boyfriend and I are not currently living together, but we would like to open a joint account to track our finances for when we go on trips together etc. Can we even open a joint account if we are not legally related (ie. we’re not in a common-law partnership)? If so, do the tax implications in your article still apply to both of us?
You certainly can open a joint chequing account. Any interest earned on the account would be split according to how each of you fund the account (i.e. if you both equal amounts into the account then you split the interest income 50/50).
Question: I have a joint account with my sister which has been opened from beginning with right to survivorship. I will be moving to Montreal Quebec, how will this affect my joint account? Will I have to terminate the joint account as I understand that there is no joint account for Ontario residents and Quebec residents. And if I don’t want to do this, what are my other options?
Eugenia,
I”m really not sure in this case and I have very limited knowledge of Quebec estate issues.
I have a joint investment account with my mom. She is the beneficial owner of that account, that is, any capital gains, investment income, she reports on her tax return. When she pass away, does that trigger a deemed disposition of 100% of her investment (or 50%)? Would this account be considered part of her estate, that is probate fees required? Thank you.
For tax purposes 100% of any gains are taxed to your mother and “technically” the account is not joint. But that’s only an issue if another family member challenges the arrangement.
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