Estate Planning: Joint Bank Accounts: Do they avoid probate?
Estate planning is becoming very sophisticated in Ontario. It is common to hear the suggestion to add a family member to a senior parent’s bank account and make the bank account Joint With Rights of Survivorship. According to banking institutions that offer these services, it’s a sure-fire way to avoid the Estate Administration Tax, commonly known as probate. Except it isn’t.
I have a story about following a banker’s advice.
The elderly father sold his primary residence and cottage property and moved into a care facility.
In his Will, he named his 3 adult children to be his estate beneficiaries. One child lived close and assisted with managing the elderly father’s expenses.
As a result of that responsibility, the adult child and elderly father were “joint with rights of survivorship” on the primary chequing account, and on the savings accounts. The savings accounts held the proceeds of the real estate transactions, amounting to over $1million.
The banker assured everyone that due to the “joint with rights of survivorship” designation, the assets would bypass the Estate Administration Tax.
After the father passed away, the beneficiaries were shocked to find that the assets were placed into probate and could not be released, contrary to what they were led to believe. Nearly a year later, the executor issued a cheque for the Estate Administration Tax, the clearance certificate was produced by the Ministry, and the beneficiaries finally received their inheritances.
The Will named the three children and only one of the children was on the joint bank account. Subsequently, the $1million in the bank, regardless of the “joint with rights of survivorship”, was pulled into the sphere of the Will instruction and distributed accordingly.
As an estate planner and Certified Financial Planner, I know that there was a better and simpler way to have handled this entire situation. The Estate Administration Tax could have been avoided and the assets could have been in the hands of the beneficiaries within weeks of the elderly father’s passing.
Please reach out if your elderly loved one needs professional financial planning guidance on how to put their estate plan together. At Tayler Insurance & Estate Planning, our solutions are simple and tax efficient. We help retirees grow their wealth, and plan to protect their financial legacy.
Taivi has over 20 years of experience in financial services and is renowned for her expertise in wealth creation and inheritance preservation strategies.
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