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Taking the Money

Taking all the money out of the joint account?

What happens when two people have a joint bank account and one of them decides to withdraw all the money? That’s one of the questions that the British Columbia Court of Appeal (“BCCA”) addressed in Zeligs v. Janes1. The case is a good case to read for those who want to better understand the law of joint tenancy, tenancy in common and joint bank accounts 2. For the purposes of this blog our focus is on just one question – when one joint tenant empties out the account, what are the rights of the other joint tenant? Let’s review the case and then discuss the BCCA’s conclusions on this point.

Diana’s and Barbara’s parents bought their home in 1947. Their father passed away in 1990 and their mother became the sole owner of the home. Mother made a will in which she appointed her two daughters as executors and divided the residue equally between them. For whatever reason Mom only chose Diana to be her power of attorney. She also transferred her home into joint tenancy3 with Diana – and not Barbara. Once Diana had the power of attorney and owned the home as a joint tenant she sold her mother’s house and deposited the money into a bank account held jointly by her and Mom. She then transferred all the money from the joint account to buy a house for herself and her husband. At first glance there seems to be a lot of problems with what Diana did.

Based on the Supreme Court of Canada decision in Pecore v. Pecore4, it is clear that the courts have traditionally relied on certain presumptions and use them as guides when insufficient evidence exists to definitively ascertain the deceased’s intentions. For a fuller review of Pecore v. Pecore I refer the reader to Estate Litigation – Joint Tenancy – Wagner Sidlofsky LLP.

Historically, the presumption of a resulting trust5 stems from the idea that people make bargains, they do not make gifts. Based on this presumption, unless the evidence proves otherwise, the court’s starting point is that if “Mom” deposits all the money into a bank account held jointly with “Diana” then the court assumes that “Diana” would not keep the money when “Mom” dies. The Court presumes that “Mom” intended that money to be held in trust for her estate. However, in this case both the BCCA and the trial judge held the presumptions of undue influence and resulting trust arose, but both were rebutted. How do these presumptions get rebutted?

On the specific facts of this case the court held that it was very clear that when she died, Mom wanted the house to pass to Diana by right of survivorship. So the presumption of a resulting trust was rebutted. But again, for the purpose of this blog let’s focus on the joint account and what the legal consequences are when Diana emptied out the money in the joint account.

Diana borrowed money. In her capacity as power of attorney for property she put a mortgage on her mother’s home to provide security for the loan. Mom received no benefit from these loans. Only Diana benefited. When Diana took all of the money in the joint account and used it to buy herself a house, once again only she benefited. Since Diana was the attorney she was a fiduciary bound only to act in the interests of her Mom, there was a presumption of undue influence. As a result, the burden is on Diana to prove that it was her mother’s intention to make the gift. On the facts of this case that presumption of undue influence was rebutted when both the trial judge and the BCCA found that Mom wanted Diana to have both the monies in the joint bank account and the property when she died. So Diana seems to be in the clear – right? No so fast.

The interesting point in this case is a technical legal one. It involves the law of joint tenancy. As described above one of the keys to having property owned in joint tenancy is that when one of the joint tenants dies the one that is still alive receives all of the property by right of survivorship. But, sometimes the joint tenancy is “severed.” So the question before the court was whether the joint tenancy for the bank account was severed when Diana withdrew all of the money from the account.

If the joint bank account was severed then Diana and Mom each owned their share as tenants in common meaning that ½ the money belonged to Diana and ½ the money belonged to Mom. The trial judge found that when Diana withdrew all the money from the joint account she severed the joint tenancy so that there was no longer any right of survivorship. Mom’s ½ of the money stayed with Mom and went into her estate when she died.

The BCCA reviewed the law of joint tenancy. The court pointed out that everyone including a joint tenant is entitled to deal freely with his or her interest in property. So either joint tenant may sever a joint tenancy, without the consent or knowledge of the other joint tenant. Severance is typically effected in one of three ways: unilaterally acting to destroy the joint tenancy6 (for example by selling one’s interest); by mutual agreement; or by “any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common.

The BCCA found that when a joint tenant transfers his or her property interest the unity of title is broken and severance follows, subject to contrary statutory provision. The BCCA concluded that when Diana transferred the sale proceeds to herself and her husband, she destroyed the unity of title. In doing so, she automatically severed the joint fund, converting it into a tenancy in common composed of two equal shares and extinguishing the right of survivorship. As a result ½ of the money went back to Mom’s estate and was divided equally between Diana and Barbara.

  1. Zeligs v. Janes, 2016 BCCA 280 (CanLII) which can be found online at http://canlii.ca/t/gs9c4 (“Zeligs v. Janes”)
  2. In Zeligs v. Janes there is a very good review of the law of joint tenancy, tenancy in common and the right of survivorship. I refer the readers to paragraphs 38- 62.
  3. For a quick primer on joint tenancy I refer the reader to Joint Tenancy. Who gets the Money? Found at https://www.wagnersidlofsky.com/joint-tenancy/ and Joint Accounts – Rebutting the Presumption of Resulting Trust at https://www.wagnersidlofsky.com/rebutting-presumption-resulting-trust
  4. Pecore v. Pecore, (2007) 1 S.C.R. 795 is the seminal case dealing with the presumption of a resulting trust that arises when children hold joint accounts with their elderly parents. The presumption is that, upon the parent’s demise, the money does not pass by right of survivorship to the child; rather, it is held in a resulting trust for the estate.
  5. The Supreme Court of Canada defined a resulting trust as follows: “A resulting trust arises when title to property is in one party’s name, but that party, because he or she is a fiduciary or gave no value for the property, is under an obligation to return it to the original title owner. While the trustee almost always has the legal title, in exceptional circumstances it is also possible that the trustee has equitable title.” See more at: https://www.wagnersidlofsky.com/what-is-a-resulting-trust
  6. The blog simplified the court discussion. For the lawyer reviewing this matter it is important to review the case review of the four unities of title. I include the specific paragraphs in the judgment that do so.

    (38)       Joint tenancy and tenancy in common are the two most common forms of concurrent property ownership in Canada.  In a joint tenancy, the “four unities” of title, interest, time and possession are present and co-owners hold an equal interest in the property as a unified whole.  The common law treats joint tenants as a single tenant: each holding the whole for all, with no distinct shares held by anyone.  In contrast, in a tenancy in common one co-owner may hold a greater proportionate interest in the property than the other co-owner(s): Hansen Estate v. Hansen, 2012 ONCA 112 (CanLII) at paras. 29-30; Felske Estate v. Donszelmann, 2007 ABQB 682 (CanLII) at para. 31, aff’d 2009 ABCA 209 (CanLII); Rathwell v. Rathwell, 1978 CanLII 3 (SCC), (1978) 2 S.C.R. 436 at 459.

    (39)        Unity of title means the title of each joint tenant arose from the same act or instrument.  Unity of interest means their holdings are perfectly equal in nature, extent and duration.  Unity of time means all the interests vested simultaneously.  Unity of possession means each joint tenant has a right to present possession and enjoyment of the whole property, but no right to exclusive possession of any individual part of the whole.  Assuming all four unities are present, the question of whether a joint tenancy or a tenancy in common has been created is determined by the intention of the grantor: B. Ziff, Principles of Property Law, 6th ed. (Toronto: Carswell, 2014) at 336; Felske Estate at para. 31.

    (40)        Joint tenancy is often the chosen form of concurrent ownership for family holdings, usually for estate planning purposes.  This is unsurprising.  The legal fiction of a unified singularity composed of more than one person may fit comfortably in a family context.  Unfortunately, however, unity can be fragile and families are not always happy.  As Abella J. remarked in Pecore, when divisions arise that unhappiness often finds its painful way into a courtroom.

    (41)        The principal and distinguishing characteristic of joint tenancy is the right of survivorship, the jus accrescendi.  When one joint tenant dies, his or her interest in the property is extinguished and passes to the surviving joint tenant(s).  The right of survivorship is, however, a revocable expectancy that manifests only upon success in the so-called “ultimate gamble” – survival – and then only if the joint estate has not been previously destroyed by an act of severance: Estate of Propst, 788 P.2d 628 at 631 (Cal. Sup. Ct. 1990).  When given inter vivos, a gift of survivorship rights is to what is left, if anything, when the gamble is won: Simcoff v. Simcoff, 2009 MBCA 80 (CanLII) at para. 64.

    (42)        The interest of a tenant in common is different with respect to survivorship.  Unlike that of a joint tenant, a tenant in common’s interest in property remains intact upon death and passes into his or her estate: Fuller v. Harper, 2010 BCCA 421 (CanLII) at para. 53.

    (43)        Importantly, parties may hold legal title to property in one form of co-ownership while holding equitable title in another.  For example, a mother and daughter may be joint tenants in law and tenants in common in equity with respect to jointly-held property by virtue of a trust or an act of severance.  If the mother dies first, the daughter assumes full legal title by right of survivorship, but the mother’s equitable interest, being held in common, passes to her estate and the daughter holds legal title as trustee for the beneficial owners, namely herself and her mother’s estate: Pecore at paras. 4-5; Ziff at 341-342.

    (44)        Equity leans against joint tenancies: Law Reform Commission of British Columbia: Report on Co-Ownership of Land (1988) at 23.  As explained in J. McGhee, ed., Snell’s Equity, 31st ed. (London: Sweet & Maxwell, 2005) at 103, the relevant maxim is that equity is equality.  When a joint tenant dies the whole belongs to the survivor(s) and the deceased’s estate takes nothing, which favours the tenant(s) of longevity and is thus unequal, except perhaps for an equal chance at survival.  For this reason, equity often treats persons who are joint tenants at law, such as business partners or unequally contributing co-owners, as tenants in common: Mischel Holdings Pty Ltd. v. Mischel, (2013) VSCA 375 at paras. 60-61.

Charles Wagner and Gregory Sidlofsky

The authors of this blog is Charles Wagner and Gregory Sidlofsky. Charles is a Certified Specialist in Estates and Trusts and partner at Wagner Sidlofsky LLP. Gregory is a Certified Specialist in Litigation by The Law Society of Upper Canada and partner at Wagner Sidlofsky LLP.

This Toronto office is a boutique litigation law firm whose practice is focused on estate and commercial litigation.

This blog is not intended to serve as a comprehensive treatment of the topic. It is not meant to be legal advice. Every case turns on its specific facts and it would be a mistake for the reader of this blog to conclude how it might impact on the reader’s case. Nothing replaces retaining a qualified, competent lawyer, well versed in this niche area of practice and getting some good legal advice.
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