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.
hi tax guy,
i have a joint savings accounts w/ my mom. She is the primary account holder, so she gets the T5 slips. however, I am the one contributing to the savings account and thus solely responsible for the interest earned. The pickle now follows. The T5 slip lists her SIN number. And thus I am worried that she will be taxed for the interest (she is in a higher tax bracket) rather than me (in a lower tax bracket). So my question is, when I hand over my tax slips to our accountant (my mother’s and mine), how is the accountant to know who made the contribution when the T5 clearly has my mom’s SIN number?
Any illumination you can shed, will be appreciated!
Thanks a bunch!
Ann
Ann,
You should be responsible for your contributions and your mom for hers. The tax slip will be a problem and you’ll both likely have to explain that each year to the CRA.
Not sure why you would use a joint account for investing.
I have a joint line of credit with my ex partner. I am going to file for bankruptcy soon and i am not sure how this will affect her credit rating other than the bank asking her to pay the whole amount.
the guy dealing with my case said: Creditors report to the credit bureau based on how an individual deals with their debts. If she doesn’t p[ay hers debts she gets a negative report. Your bankruptcy would not affect her credit rating as it is all based on an individual’s relationship with their own creditors, whether they are joint debts or not. Creditors report based on SIN. You and her have different SINs.
i am still not clear how this will affect my ex partner’s way of dealing with her debts.
Can someone shed some light about this for me please.
thanks
Bankruptcy is a separate discipline but it sounds like they are saying that she may become responsible for the loan and if she does pay it goes on her rating.
Hi
I have a child savings account for my daughter with ING. She is 2 years old. I am listed as the secondary account holder and she is the primary. We received a T5 slip this year, it has both our names listed (hers listed first) and her SIN listed on the form.
Does the interest get reported in her name or in mine? I use ufile.ca for doing taxes and I couldn’t find an option to create a T5 file in my daughter’s name. The amount that I contributed to her account last year is less than what we received in children’s benefits so do I need to even bother filing the T5 since it can be assumed that the money the interest was earned on was from the benefit money. (The only issue is that for example say I received $100/month I only contributed $15/month for half the year, so it’s not a direct link to the amount received).
I didn’t have much income last year anyway since I was on an unpaid parental leave for most of the year, so if I put it in my name it shouldn’t do much to my taxes. But if I file it under my name do I write that ownership is 50/50 with my daughter? And since my husband doesn’t contribute to it would it still have an effect on his return?
The money is basically held in the savings account until I transfer it to her RESP at another bank.
Thanks so much
It depends on who provided the funds for your daughter. If it is a parent, grand parent, uncle or aunt, it is that person who reports the interest or dividends.
Hi. My mother and I have a joint bank account. She is the creditor on many mortgages – the interest from those mortgages goes into the account, and the principle when a mortgage is discharged goes into that account; however the mortgages are in her name alone. What are the tax consequences if she dies? Do the mortgages continue until they are discharged and the funds still go into her account?
thank you.
The assets are deemed disposed for tax purposes at FMV and any gain or loss plus interest is taxable to your mom. You would inherit the mortgages immediately after her death. The mortgage contract can survive if the terms permit, but that is a legal issue.
thank you – would it make a difference if the mortgage was in both our names
JW,
No problem. Not likely. I suspect you’d still be able to administer the mortgage after but if you want to cash them it it will be difficult until the mortgage is due/
Hello,
I have joint account with my X-wife, she took all the money and not paying any single dollar. Can I take action against her ???? I spoke to couple of people and they said its a joint account so at the end of the day the result will be in favor of your X-wife.
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