It is common for parents to open joint bank accounts with their adult children but it is not always general knowledge as to what will happen to these accounts or joint assets when the parent passes away. There are many benefits to this practice, especially as an estate planning tool because joint accounts are not subject to probate. A joint account can allow for adult children to help their aging parents to make bill payments, arrange services, deal with ongoing expenses, have the access to funds upon their death for funeral costs, etc.
Although this is all well and good, many people don't realize that the law does not automatically assume that after a parent has passed, that any joint accounts with adult children are to be considered a gift. Rather, there is a presumption of a resulting trust which simply put, means that the law assumes that if a parent has a joint asset with an adult child, that the adult child is holding the asset in trust for the estate of the parent. In the case of a joint asset between spouses, it is automatically presumed to fall outside of the estate and stay with the remaining spouse, but as stated, this does not happen automatically for adult children. This presumption can however be rebutted if the executor can find clear intention from the testator that the joint asset was intended by the parent to be a gift upon the testator's death to the adult child who holds the asset jointly.
If no clear intention can be found that the testator wanted to gift the remainder of the joint account or asset, then it will fall under the presumption and be distributed through the estate and therefore most likely subject to probate.
But what if a parent does want their child to have the reminder of a joint account or a joint asset when they pass? This is where good estate planning comes into effect. The easiest and best way to make the intention known is to ensure the intention is explicitly stated in a Last Will and Testament. A Will may outline that any joint accounts, or just specific accounts or assets, are intended to be gifts that pass outside of the estate to the adult child named. The drafting lawyer should ask their client if any assets are held jointly and ensure that the client provides instructions regarding their intention for those assets. It is very important that testators be open and honest about their assets and how they are held so that the estate planning is accurate and protects the testator's assets as best as possible. If the testator is not clear on what they have and how they have it, then the drafting lawyer will not be able to adequately advise or provide for what they do not know exists and while the testator may think that using a joint account will avoid probate and legal issues, this is not the case. Drafting lawyers know how to properly handle such assets and help the testator come up with the best plan, in line with the applicable laws, to ensure their beneficiaries receive as per the testator's intention.
If the intention is not explicitly stated in the Will of a testator, an executor may look to personal papers of the deceased or ask third-party advisors such as the testator's accountant or bankers if the testator made their intentions clear to them. Tax returns may also be a good indication of how the asset was treated to determine intention. It is advisable for the executor to write a letter to these institutions specifying stating which asset is in question and which names are listed jointly. Not all institutions will release this information lightly so it may take some work on the executor's part to actually do their due diligence in investigating the testator's intention.
Of course, the proactive approach is to see a lawyer to properly draft a Will with this in mind. Reach out to our lawyers for help with estate planning and to ensure that your Will is properly drafted for the benefit of your beneficiaries. If you are an executor and need assistance with the administration of an estate or have questions about joint assets, we would be glad to help. Our lawyers can be contacted at 705-268-6492.