It is generally accepted that the establishment of joint accounts and/or the ‘gifting’ of assets to intended beneficiaries during one’s lifetime are recommended ways by which an individual can prudently engage in estate planning.
These have become prominent particularly in an effort to avoid, where possible, the costs of probate and administration, the attendant taxes which the government levies, and other state interventions which intestacy may bring. Of course the ease with which trusted joint holders can access the accounts in cases of emergency is also an advantage.
While these methods are tried and proven, the lines between sole beneficial ownership and ‘gifting’ oftentimes become blurred. Where the giving party still intends to retain the use and benefit of the assets in his/her lifetime and is not clear about their intentions, disputes may arise. Conversely, the giving party may be clear however the receiving party becomes impatient and seeks to exercise their “rights” to the assets before the giver has ‘kicked the bucket’.
Where the account in question is funded solely by the giving party, the legal presumption is that they will be entitled to the beneficial interest in the asset or account and the party who did not contribute and who has a legal interest holds it on a resulting trust. This means that though the party who did not contribute has a legal entitlement, equity ensures that the asset will revert to the party who made the entirety of the contribution. This presumption however is not unassailable and may be rebutted where the non-contributing party is able to establish that the presumption of advancement is applicable.
The Presumption of Advancement
In a seminal case on the subject, it was explained that “if the presumption of advancement applies, an individual who transfers property into another person’s name is presumed to have intended to make a gift to that person. The burden of proving that the transfer was not intended to be a gift, is on the challenger to the transfer.”
The presumption of advancement is only applicable in circumstances where a special relationship, such as a husband and wife or a parent and child, exists. Traditionally, in the case of a parent and child, the Court had limited the presumption to circumstances where a minor child was the beneficiary of the gift. This position has changed with the general recognition that situations exist where adult children are dependent on their parents for support, though the presumption may be less likely to be applied and sustained in situations where the children are financially independent.
The presumption may be rebutted where there is evidence that it was not the intention of the giving party that the asset should constitute a gift. In the noteworthy local case of Robinson v National Commercial Bank  JMCA Civ 3, it was highlighted that the circumstances of each case must be examined to determine whether the funds provided by the transferor to the joint account will be considered as remaining the property of the transferor in equity, or be deemed a gift to the transferee. It is also of note that this presumption will not apply where the receiving party has contributed to the asset.
The burden of proof falls on the transferor or his representative and the required standard of proof is that the assertion must be more probable than not.
The Recent Positon
There is a recent decision where a father had opened and fully funded an investment account with his daughter, and the presumption of advancement was found to have been established. He was, however, able to successfully argue that it ought to be rebutted. In this case the daughter encashed the investment instruments and withdrew all the monies from the account without the father’s knowledge or consent. The case turned on the specific circumstances which pointed to his intention that the account ought to be retained for his benefit, and to be used as he saw fit. These circumstances included, but were not limited to:
- The fact that the father received dividends from the account and utilised them for his own purposes;
- The overwhelming majority of the transactions were carried out by father;
- The daughter had not, in the course of the father’s dealings, objected to his actions or sought to assert that she was entitled to the beneficial interest;
- The account and the investments therein represented a substantial part of the father’s life savings;
- The daughter was young and lacked the financial experience to manage the account relative to the father who was an avid investor.
The Court accepted the father’s assertion that even though the account was opened in the parties’ joint names, he always intended to remain as the sole beneficial owner and acted in accordance with that intention. The presumption of a resulting trust rebutted that of advancement and the daughter was ordered by the Court to return the underlying investment instruments from the account or to pay to her father the equivalent value plus interest.
Both prospective givers and receivers who may find themselves in a similar arrangement of holding joint accounts ought to take note of the legal position. It would behoove the parties to be clear on their intentions and where possible have same reduced to writing. This clarity will accrue to the benefit of both. The giving party’s interest will be secured and they will be entitled to a swift remedy in the event of misfeasance on the part of the receiver. Also, the receiver will be guided by an appreciation that their powers are limited and ought to be exercised with care. If you are seeking to exercise your trust in a joint and substantial way or have come to the shocking realisation that it was already misplaced, you should seek legal advice.
Daniel Gyles is an associate at Myers, Fletcher & Gordon and is a member of the firm’s Litigation Department. Daniel may be contacted via Daniel.Gyles@mfg.com.jm or through the firm’s website www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.