Banking on Trouble: Unveiling the Hidden Risks of Joint Bank Accounts


“I’d like to add one of my children to my bank account—what are your thoughts?”  This a very common question asked by clients who come into our office and are considering their estate plan.   Maybe this is something you have heard about online, or from a friend or neighbour.  This post outlines what that looks like, legally, and what to keep in mind if it is something you are considering.

There are two common areas where clients want to consider joint ownership — bank accounts and real property (often a condo, or a house).  This post considers joint bank accounts. In a future post, we will speak about considerations for adding someone to title.

The idea behind adding someone to a bank account seems pretty simple – you would add a child or a spouse to your accounts so that the other person can inherit the account automatically when you die.  It seems like a great idea!  A simple and efficient transfer to one’s child or spouse, no need for a Will or a Grant of Probate, and immediate access to the funds right when a loved one needs them.

It’s important to ask, as a starting point, who are you intending to add to the account? 

For spouses, the law is clear that when someone adds their spouse (either married or common law) to an account, the account will flow to the survivor.  This is called a “right of survivorship”, a term that means the surviving owner is entitled to the account after the other owner passes away.  This is a presumption in law, which means that although this is the assumption, it can be disproven by specific facts.

However, for children, the law makes the opposite presumption.  If a child is added to an account gratuitously (for no value), the law will assume that you did not mean to gift it, and the account will flow back into your estate.  This may not be what you had in mind.  Therefore, more planning and thought needs to go into when a parent is considering adding a child to a joint account, and if they do, their intention needs to be carefully documented.

In both cases—with spouses and with children—there are some hidden pitfalls that most people do not know.  For one thing, as soon as you add another owner to an account, they co-own it with you at that moment.  Their ownership does not start upon death, it starts now.  This means that these are now “their funds”, and they can remove funds, transfer them, or borrow against them.  Not all parents understand this and are surprised when a child removes funds without their permission.  In addition, if your child has a judgment against them (for example, due to a car accident or a divorce) or goes bankrupt, that account could be available to creditors since it is, partly, “their account”.  Adding children can also trigger a tax event, since you may be “disposing” of it by adding another owner.

We have had many cases in our office where joint bank accounts caused issues in families and estates.  Sometimes, during life, a parent wants to remove a child from a joint bank account due to the child’s misuse of the funds, or to protect the funds upon marriage breakdown.  This can be extremely difficult to do.  Alternatively, when a parent dies, the joint owner of the account will sometimes pull out all of the funds and walk into the sunset, leaving any other children not on the account wondering where the money has gone.

Often, the reason people want to add a joint owner to an account is for efficiency—they want their loved one to have quick access to money to pay debts or for a funeral.  However, most Canadian banks will allow the Executor of an estate to pay these debts from a deceased’s accounts, so this is rarely a concern.  Another reason would be to “avoid Probate”.  Currently in Alberta, it takes less than a month to get a Grant of Probate for an estate with a Will and an Albertan Executor, so the Executor would have ready access to the funds quicker than you may have thought. 

Asking a question about estate planning is a great thing—it shows that you’re thinking about your loved ones and trying to make things simple for them in the event of your death.  However, when it comes to joint accounts, always talk to an experienced estate lawyer and your accountant to ensure that you make the right decisions.

This post is meant to provide information only and is not intended to provide legal advice. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this post to be outdated.


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