There are many situations when parents will create joint bank accounts with their children or add their children to the deed of their home or cottage. Parents tend to think that allowing children access to their bank accounts and giving them ownership of the home will make things easier for their children as the parents age or become ill or pass away. Although this is true in part, there is also some serious danger in adopting such practice, as you may lose what you have worked all your life to accumulate in the blink of an eye.

Picture this...

Let's say Mr. and Mrs. X have been married for 40 years, they have a son and a daughter, and 4 grandchildren, and they are starting to plan for their retirement. Mr. and Mrs. X wanted to add their children onto their bank accounts and the deed of their home and cottage property, making them joint owners to these assets. But a few months after creating these joint assets with their children, their daughter is in an accident and is being sued for three (3) million dollars and she only has coverage for two (2) million dollars. Her insurance will only cover part of the claim and now, Mr. and Mrs. X have the potential of losing part of their money and part of their properties because their daughter is part owner of these assets. When the injured person wants to realize on their judgment, they will receive the insurance proceeds and then will have an execution against daughter, where they can seek to enforce their judgment. Accordingly, ¼ of Mr. and Mrs. X's bank accounts and ¼ of their house and cottage are at risk, as the plaintiff could garnishee their bank accounts because their daughter's name is on the account and could force the sale of their house and cottage to realize on the plaintiff's judgment. And if Mr. and Mrs. X were to try and transfer back the property in their name's alone, that will attract a lawsuit for attempting to defraud creditors.

Consider the Alternatives

If it is the parents' intention to make things easier for their children to help make bill payments, arrange services, or deal with ongoing expenses, etc., on the parents' behalf, the best practice for the parents to do, is to create a continuing power of attorney for property. A continuing power of attorney for property is a legal document that gives someone the authority to manage your finances or property on your behalf without becoming an actual owner of any of your finances or property and therefore not putting your assets at risk. There is also a power of attorney for personal care, which is a legal document that gives someone the authority to make health and other types of personal and non-financial decisions for you.

It is of vital importance that you select your attorney wisely and ensure there is a high level of trust and reliability in this person, and there is a willingness to participate as your attorney. Your attorney will be able to, on your behalf, do your banking, sign cheques, buy or sell real estate in your name, buy consumer goods, and make life or death decisions, if you so authorize them to do so in your power of attorney. The only thing they cannot do is a will.

The key thing to keep in mind when considering whether to use a power of attorney or creating joint assets, is ownership! Power of attorney's allow the person appointed to act on your behalf, with the same powers as they would have if they were joint owners on your bank account or deed, without the risk of personal liability for yourself unless your attorney is not trustworthy.

Connect With Suzanne Desrosiers Professional Corporation

If you have any questions regarding joint assets or powers of attorney, please feel free to reach out to Suzanne Desrosiers Professional Corporation by calling us at (705) 268-6492 or emailing us at info@sdlawtimmins.com and we would be more than happy to help!