Joint accounts and power of attorney causes family strife

Key lessons

• Decisions made by the Attorney must be in the best interest of the grantor.
• To avoid future conflicts, the intention of the account holders must be made clear when using a joint account, even when it is subject to right of survivorship.

Mr. T had recently converted his personal chequing account to a joint account with his girlfriend, subject to a right of survivorship. At the time, the account had a $15,000 balance. Mr. T’s health was deteriorating, he asked his children to withdraw funds from the now joint account in order to pay some of his debts. He also signed a general power of attorney (POA) to his son and daughter authorizing them to act on his behalf. 

Once the POA was in force at the bank, the children requested that the funds, then about $21,000, all coming from Mr. T’s own money, be transferred to a new bank account. The branch could not open a new account while they were in the branch because the person in charge was not available, so a draft for the funds was issued in Mr. T’s children’s names. The next day, a bank account was opened under their names and the $21,000 bank draft was deposited.

Mr. T passed away shortly after. His children used $2,500 from their new account to pay for his funeral expenses. Sometime later, the bank received a claim from Mr. T’s girlfriend and transferred the remaining funds back to the original joint account and froze it, informing the children that the co-account holder (Mr. T’s girlfriend) was claiming ownership to half of the account balance on the basis that Mr. T had intended this to be a gift for her. Faced with this family dispute, the bank refused to take any further action until it was instructed by a court justice as to how the funds were to be allocated. Mr. T’s estate, represented by his children, brought their complaint to OBSI.

Our recommendation

OBSI investigated the circumstances surrounding the events. We determined that Mr. T’s children had the right, with the POA, to withdraw the funds. However, the bank made an error because the funds should have remained in an account in Mr. T’s name.

We discussed the matter at length with the bank and the estate representatives to assess each party’s interests. Because everyone involved agreed to make compromises, we were able to reach a settlement. The bank agreed to unfreeze the funds. A portion of the amount was used as full and final payment of Mr. T’s debts held at the bank, with the bank agreeing to erase part of the debt. The balance in the account remained in the co-account holder’s name. This settlement prevented legal claims among all parties involved.