Spouse Takes All Money Out Of 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. Janes ¹. 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. Pecore ⁴ , 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.