Joint Investment Account with spouse? Any reason to do this?

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qwimjim
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Joint Investment Account with spouse? Any reason to do this?

Post by qwimjim » 11 Mar 2015 20:34

I'm in the process of opening brokerage accounts for my wife and I at RBC DI and consolidating our mish mash of account spread between Scotia, CIBC, TD, and Tangerine. Between us we have 2 TFSA, 2 RRSP, 1 RESP, and 2 non reg accounts.

I want to simplify our lives but reading threads on here it seems like it can be quite a hassle to properly track and document where the investment money is coming from and so who is responsible for what taxes, etc..

So what is the benefit of joint accounts? From my understanding if my wife and I have separate individual investment accounts and one of us dies, if the accounts are transferred to a spouse the taxes are deferred until the spouse dies. So I'm having trouble understand why one would get joint accounts if it simply complicates income tax filing with no added benefits?

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Re: Joint Investment Account with spouse? Any reason to do this?

Post by Davis » 11 Mar 2015 21:43

It simplifies portfolio mamagement a tiny little bit, but at the cost of complicating your tax filing. I regret having done it. I will be interested to see if anyone else thinks it is a good idea.
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Re: Joint Investment Account with spouse? Any reason to do this?

Post by Bylo Selhi » 11 Mar 2015 21:58

qwimjim wrote:it seems like it can be quite a hassle to properly track and document where the investment money is coming from and so who is responsible for what taxes, etc..

So what is the benefit of joint accounts? From my understanding if my wife and I have separate individual investment accounts and one of us dies, if the accounts are transferred to a spouse the taxes are deferred until the spouse dies. So I'm having trouble understand why one would get joint accounts if it simply complicates income tax filing with no added benefits?
I don't understand why making accounts joint should complicate things any more than individual accounts. The attribution rules apply either way.

You can designate two accounts as (a) Spouse1 and Spouse2 JTWROS and (b) Spouse2 and Spouse1 JTWROS. Account (a) is funded by Spouse1, all income is attributed to them and T-slips show their SIN. Likewise account (b) is funded by Spouse2, all income is attributed to them and T-slips show their SIN. So as far as CRA is concerned account (a) belongs to Spouse1 and account (b) belongs to Spouse2. Things only get messy(ier) if each spouse contributes to both accounts. Then yes, you have to apportion income according to the attribution rules. What am I missing?
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Re: Joint Investment Account with spouse? Any reason to do this?

Post by AltaRed » 11 Mar 2015 22:43

Bylo Selhi wrote:You can designate two accounts as (a) Spouse1 and Spouse2 JTWROS and (b) Spouse2 and Spouse1 JTWROS. Account (a) is funded by Spouse1, all income is attributed to them and T-slips show their SIN. Likewise account (b) is funded by Spouse2, all income is attributed to them and T-slips show their SIN. So as far as CRA is concerned account (a) belongs to Spouse1 and account (b) belongs to Spouse2. Things only get messy(ier) if each spouse contributes to both accounts. Then yes, you have to apportion income according to the attribution rules. What am I missing?
This is what my spouse and I did for over 20 years. My SIN was on the account with my name first and spouse's SIN was on the account with her name first. Works like a charm.
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Re: Joint Investment Account with spouse? Any reason to do this?

Post by Insomniac » 11 Mar 2015 22:51

I just merged our two non-registered individual accounts into one joint account last month. Doing so will mean that that probate can be avoided when one of us dies. Our registered accounts name each other as beneficiaries so they will transfer over without a lot of fuss. Our working account at the credit union is joint and the house is in both our names.

The two non-registered accounts were approximately the same size when they were merged so I will split the income 50/50 just like I do with the credit union interest income. Since we are both retired and in withdrawal mode, I don't expect the 50/50 split to change. Complicated tax filing? Pretty easy to divide by two.

Avoiding probate is a good thing. The broker will freeze access to the account until probate is complete and that can take a long time!

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Re: Joint Investment Account with spouse? Any reason to do this?

Post by qwimjim » 12 Mar 2015 06:59

Do any of you live in Quebec? I do and things appear to be a bit different here. There is no probate on notarized wills, and joint accounts are automatically frozen in Quebec upon death of either account owners. So for Quebec it seems that joint account would be a disadvantage because if I die it will actually freeze the account and my wife won't be able to access it for however long the process of unfreezing it takes? Though perhaps if the accounts are joint the hand over is much faster than if they're individual? Can't seem to find any info on that online. Who would be best to talk to about this? Lawyer?

David Belton, senior trust adviser at Royal Trust, says that in Quebec, the joint bank account is frozen until the financial institution receives the necessary documents to deal with it (death certificate, last will and testament, declaration of transmission). Then the joint account is closed and a new account is opened for the survivor. This complicates the surviving spouse's finances since all automatic deposits of pension cheques or interest and pre-authorized deductions get rejected," Belton said. "We recommend that each spouse have a separate account in his or her name to get around this inconvenience."

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Re: Joint Investment Account with spouse? Any reason to do this?

Post by kcowan » 12 Mar 2015 08:55

We are headed the other way, simplifying and cancelling accounts. What we have ensured is that each partner will have access to enough liquidity to endure any probate delay, if any. We also have 2 cards from every Credit Card account.

If I had it already set up like AR and BS, I would leave it alone. It does make joint tax filing nearly mandatory. But that is not a problem once you are over 65. Putting a %age split on joint accounts is minimal extra work.
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Re: Joint Investment Account with spouse? Any reason to do this?

Post by OnlyMyOpinion » 12 Mar 2015 09:51

qwinjim - you're correct, Quebec law is different for joint accounts and other estate issues, so you need advice that is specific to Quebec.
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Re: Joint Investment Account with spouse? Any reason to do this?

Post by brucecohen » 12 Mar 2015 10:08

qwimjim wrote:From my understanding if my wife and I have separate individual investment accounts and one of us dies, if the accounts are transferred to a spouse the taxes are deferred until the spouse dies. So I'm having trouble understand why one would get joint accounts if it simply complicates income tax filing with no added benefits?
I don't live in Quebec and know little about its laws but believe some basic principles apply.
1. The transfer you cited pertains to taxation, not ownership.
2. It's hard to believe that ownership/control of an individually owned account would automatically roll over. That's because the owner's will might give those assets to someone else and the brokerage would be on the hook.
3. In the common law provinces like Ontario, ownership/control of an account set up as "joint ownership with right of survivorship" (JTWROS) would automatically transfer when one party dies. Your later post quotes a trust guy as saying this does not occur in Quebec -- that the account is frozen until legalities are covered. I suspect that whether the account is single or joint, the brokerage will freeze it until the will has been confirmed by the college of notaries (not sure of the proper name for this group). Confirmation for the will of a friend's father took less than two business days and cost, I believe, $75. The executor submits a copy of the will in his/her possession and college staff check it against the will on file. In advising couples to have separate accounts, I suspect the trust guy meant that while waiting for the will to be confirmed, a survivor would have no access to the assets in a joint account, but with separate accounts, only the deceased's would be frozen and the survivor could continue to access his/her own. If I'm right, a couple who set up a joint account for convenience should also make liquidity provision elsewhere so the survivor has some money to work with until the account(s) are unfrozen.

Added: googling around, I see that Quebec law makes no provision for JTWROS accounts. So I assume that all joint accounts would be "tenants-in-common" (TIC). In a JTWROS account, the ownership interest is undivided and all assets automatically pass to the partner at death. In a TIC account, the ownership interest is divided, may or may not be equal, and does not automatically pass at death.

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Re: Joint Investment Account with spouse? Any reason to do this?

Post by Bylo Selhi » 12 Mar 2015 11:32

brucecohen wrote:a couple who set up a joint account for convenience should also make liquidity provision elsewhere so the survivor has some money to work with until the account(s) are unfrozen.
This applies to more than just liquidity. It was many years ago, my recollection may be fuzzy and the laws (in ON) may have changed. I knew someone whose wife had died. The family car was in her name and it happened that the insurance for it came up for renewal while the estate was still in the process of being settled. The insurance company wouldn't renew the policy in the name of a deceased person and they wouldn't change the name on the policy to the husband's until ownership on the car had been transferred. So for a while the husband, on top of all the other issues he had to deal with after his wife's death, also was barred from driving "his" car.
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Re: Joint Investment Account with spouse? Any reason to do this?

Post by qasimodo » 12 Mar 2015 12:26

Bylo Selhi wrote: This applies to more than just liquidity. I was many years ago, my recollection may be fuzzy and the laws (in ON) may have changed. I knew someone whose wife had died. The family car was in her name and it happened that the insurance for it came up for renewal while the estate was still in the process of being settled. The insurance company wouldn't renew the policy in the name of a deceased person and they wouldn't change the name on the policy to the husband's until ownership on the car had been transferred. So for a while the husband, on top of all the other issues he had to deal with after his wife's death, also was barred from driving "his" car.

I dealt with a similar issue a few months ago (in ON). My father passed away and my mother doesn't drive. In order to sell the car, as executor I had the insurance changed to "The Estate of XX" and added myself as primary driver. Eventually sold the car, cancelled the insurance and got a proportionate refund.
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Re: Joint Investment Account with spouse? Any reason to do this?

Post by OhGreatGuru » 12 Mar 2015 19:16

qwimjim wrote:I'm in the process of opening brokerage accounts for my wife and I at RBC DI and consolidating our mish mash of account spread between Scotia, CIBC, TD, and Tangerine. Between us we have 2 TFSA, 2 RRSP, 1 RESP, and 2 non reg accounts.
..
So what is the benefit of joint accounts? From my understanding if my wife and I have separate individual investment accounts and one of us dies, if the accounts are transferred to a spouse the taxes are deferred until the spouse dies. So I'm having trouble understand why one would get joint accounts if it simply complicates income tax filing with no added benefits?
Well, first of all TFSAs and RRSPs can't be joint. You can (should) designate your spouse as beneficiary and successor account holder for these. Then all the bank needs is a death certificate to transfer ownership to the survivor with no tax consequences and minimal fuss. They pass outside of the estate. I don't know about RESP. Maybe if you are both listed as contributors they can be joint.

For your non-registered accounts, it isn't the income tax issue that's the problem, it's estate law and the bank's rules and procedures. Unless you have JWROS accounts, the banks will not simply turn them over to the surviving spouse without a probated will (unless the accounts are fairly small). That means the cost and delay of including them in the estate for probate, plus having to deal with the bank's estate department.

With JWROS accounts, the bank just needs a death certificate, and survivor has immediate access to the account. They pass outside the estate and are not subject to probate.

As suggested above, because of the income tax attribution rules on earnings in the joint accounts, you may find it easier to have 2 JWROS accounts, but with alternate spouses being primary account holders. Then each spouse only needs to report as income the account for which they were the contributor and are the primary owner. (You may find some legal sites recommending a "side agreement" specifying that the accounts were made joint for estate planning purposes only, and not to convey beneficial ownership until death. Personally I think this is overkill in the case of spouses. Just keep a paper trail of where the money came from, and explain to CRA why you are reporting the incomes separately. It may be worth doing if you were doing this with someone other than a spouse, because otherwise there would be a deemed disposition subject to capital gains tax.)

If you merge the accounts, you have to keep track of the percentage that each contributed, and divide the earnings accordingly. This might be easy initially but could get difficult over time if you continue contributing at different rates. But it does have the advantage of only having 1 portfolio to maintain.

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Re: Joint Investment Account with spouse? Any reason to do this?

Post by OhGreatGuru » 12 Mar 2015 19:21

OhGreatGuru wrote:
qwimjim wrote:I'm in the process of opening brokerage accounts for my wife and I at RBC DI and consolidating our mish mash of account spread between Scotia, CIBC, TD, and Tangerine. Between us we have 2 TFSA, 2 RRSP, 1 RESP, and 2 non reg accounts.
..
So what is the benefit of joint accounts? From my understanding if my wife and I have separate individual investment accounts and one of us dies, if the accounts are transferred to a spouse the taxes are deferred until the spouse dies. So I'm having trouble understand why one would get joint accounts if it simply complicates income tax filing with no added benefits?
Well, first of all TFSAs and RRSPs can't be joint. You can (should) designate your spouse as beneficiary and successor account holder for these. Then all the bank needs is a death certificate to transfer ownership to the survivor with no tax consequences and minimal fuss. They pass outside of the estate. I don't know about RESP. Maybe if you are both listed as contributors they can be joint. (Check with RBC - DI. Maybe they can put such sole-owner accounts into a joint account portfolio - but they would be only accessible to whichever owner logged on.)

For your non-registered accounts, it isn't the income tax issue that's the problem, it's estate law and the bank's rules and procedures. Unless you have JWROS accounts, the banks will not simply turn them over to the surviving spouse without a probated will (unless the accounts are fairly small). That means the cost and delay of including them in the estate for probate, plus having to deal with the bank's estate department.

With JWROS accounts, the bank just needs a death certificate, and survivor has immediate access to the account. They pass outside the estate and are not subject to probate.

As suggested above, because of the income tax attribution rules on earnings in the joint accounts, you may find it easier to have 2 JWROS accounts, but with alternate spouses being primary account holders. Then each spouse only needs to report as income the account for which they were the contributor and are the primary owner. (You may find some legal sites recommending a "side agreement" specifying that the accounts were made joint for estate planning purposes only, and not to convey beneficial ownership until death. Personally I think this is overkill in the case of spouses. Just keep a paper trail of where the money came from, and explain to CRA why you are reporting the incomes separately. It may be worth doing if you were doing this with someone other than a spouse, because otherwise there would be a deemed disposition subject to capital gains tax.)

If you merge the accounts, you have to keep track of the percentage that each contributed, and divide the earnings accordingly. This might be easy initially but could get difficult over time if you continue contributing at different rates. But it does have the advantage of only having 1 portfolio to maintain.

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Re: Joint Investment Account with spouse? Any reason to do this?

Post by qwimjim » 16 Mar 2015 08:19

OhGreatGuru wrote:
qwimjim wrote:I'm in the process of opening brokerage accounts for my wife and I at RBC DI and consolidating our mish mash of account spread between Scotia, CIBC, TD, and Tangerine. Between us we have 2 TFSA, 2 RRSP, 1 RESP, and 2 non reg accounts.
..
So what is the benefit of joint accounts? From my understanding if my wife and I have separate individual investment accounts and one of us dies, if the accounts are transferred to a spouse the taxes are deferred until the spouse dies. So I'm having trouble understand why one would get joint accounts if it simply complicates income tax filing with no added benefits?
Well, first of all TFSAs and RRSPs can't be joint. You can (should) designate your spouse as beneficiary and successor account holder for these. Then all the bank needs is a death certificate to transfer ownership to the survivor with no tax consequences and minimal fuss. They pass outside of the estate. I don't know about RESP. Maybe if you are both listed as contributors they can be joint.

For your non-registered accounts, it isn't the income tax issue that's the problem, it's estate law and the bank's rules and procedures. Unless you have JWROS accounts, the banks will not simply turn them over to the surviving spouse without a probated will (unless the accounts are fairly small). That means the cost and delay of including them in the estate for probate, plus having to deal with the bank's estate department.

With JWROS accounts, the bank just needs a death certificate, and survivor has immediate access to the account. They pass outside the estate and are not subject to probate.

As suggested above, because of the income tax attribution rules on earnings in the joint accounts, you may find it easier to have 2 JWROS accounts, but with alternate spouses being primary account holders. Then each spouse only needs to report as income the account for which they were the contributor and are the primary owner. (You may find some legal sites recommending a "side agreement" specifying that the accounts were made joint for estate planning purposes only, and not to convey beneficial ownership until death. Personally I think this is overkill in the case of spouses. Just keep a paper trail of where the money came from, and explain to CRA why you are reporting the incomes separately. It may be worth doing if you were doing this with someone other than a spouse, because otherwise there would be a deemed disposition subject to capital gains tax.)

If you merge the accounts, you have to keep track of the percentage that each contributed, and divide the earnings accordingly. This might be easy initially but could get difficult over time if you continue contributing at different rates. But it does have the advantage of only having 1 portfolio to maintain.
Thanks for the help, I hope it helps someone else in the future, unfortunately I should have made clear that I am in Quebec in my original post, I was not aware that the laws were different here so I'm not sure if anything you wrote applies here unfortunately :)

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Re: Joint Investment Account with spouse? Any reason to do this?

Post by SkaSka » 11 Mar 2017 22:42

I'm not sure if I'm completely understanding what the optimal solution is for setting up non-registered, joint investment accounts with a spouse.

My wife and I are nearing the point where our registered accounts will be filled (TFSA and RRSP) for the year.

We are in our 30s and have RBC Direct Investing accounts holding our respective TFSA and RRSP accounts.

Would the optimal solution moving into non-registered, investment accounts be to:

- create a Joint Investment Account under my account, with my name first and my wife's name second
- create a Joint Investment Account under my wife's account, with my wife's name first and my name second
- put equal amounts of investments into each account - i.e. every month buy $1,000 worth of VCN in both accounts

Thank in advance!

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Re: Joint Investment Account with spouse? Any reason to do this?

Post by AltaRed » 11 Mar 2017 22:57

SkaSka wrote:Would the optimal solution moving into non-registered, investment accounts be to:

- create a Joint Investment Account under my account, with my name first and my wife's name second
- create a Joint Investment Account under my wife's account, with my wife's name first and my name second
- put equal amounts of investments into each account - i.e. every month buy $1,000 worth of VCN in both accounts
The idea for JTWROS accounts is to avoid probate upon the death of one of you. The reason to have the two as you described is not for income splitting purposes, but that, for example, all of your funding contributions go into the account with your name first, and all of your spouse's funding contributions go into the account with her name first. Then she declares all the income from her account on her tax return and you do likewise for your account on your tax return. It makes for easy boookkeeping for the purposes of the paper trail required for CRA income attribution rules, i.e. income on an investment is attributable back to the person who funded the asset.
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Re: Joint Investment Account with spouse? Any reason to do this?

Post by SQRT » 12 Mar 2017 08:43

Bylo Selhi wrote:
qwimjim wrote:it seems like it can be quite a hassle to properly track and document where the investment money is coming from and so who is responsible for what taxes, etc..

So what is the benefit of joint accounts? From my understanding if my wife and I have separate individual investment accounts and one of us dies, if the accounts are transferred to a spouse the taxes are deferred until the spouse dies. So I'm having trouble understand why one would get joint accounts if it simply complicates income tax filing with no added benefits?
I don't understand why making accounts joint should complicate things any more than individual accounts. The attribution rules apply either way.

You can designate two accounts as (a) Spouse1 and Spouse2 JTWROS and (b) Spouse2 and Spouse1 JTWROS. Account (a) is funded by Spouse1, all income is attributed to them and T-slips show their SIN. Likewise account (b) is funded by Spouse2, all income is attributed to them and T-slips show their SIN. So as far as CRA is concerned account (a) belongs to Spouse1 and account (b) belongs to Spouse2. Things only get messy(ier) if each spouse contributes to both accounts. Then yes, you have to apportion income according to the attribution rules. What am I missing?
This is what we have done and it works very well. This allows me to easily manage her account. It will also get around probate when the first one goes.

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Re: Joint Investment Account with spouse? Any reason to do this?

Post by Wallace » 12 Mar 2017 10:30

Don't forget one of the biggest issues - what happens if a spouse suffers a catastrophe but does not die.

If spouse has a ruptured brain aneurism or a vehicle accident and is in a comatose state, the bank (if it knows about it) will freeze the spouse's accounts. This happened to friends of ours some years ago. Both were young and had not thought through any of these eventualities. The wife had no independent income and was reduced to rolling pennies and the support of friends until her husband came out of his coma (six weeks later).

Power of attorney for finances and health care decisions is key no matter how old (young) you are.
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Re: Joint Investment Account with spouse? Any reason to do this?

Post by SkaSka » 17 May 2017 12:33

Power of Attorney for both my wife and I are definitely on the list of things to get done.

I'm wondering if anyone could shed some insight on beneficiary forms, specfically on the Irrevocable Beneficiary Designation form?

Another thing on our "To Do" list is to get all the beneficiary forms signed and submitted to RBC Direct for all of our accounts. Regarding the Irrevocable Beneficiary Designation form, I'm not sure if it is a) important to fill out, b) what the significance is, and c) if they should be filled out by my wife and I?

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Re: Joint Investment Account with spouse? Any reason to do this?

Post by twa2w » 17 May 2017 13:03

Beneficiary designations on TFSA and RSP accounts will not likely be irrevocable. Irrevocable beneficiariy designations usually only applies to certain insurance polices for specific purpose and for some trusts.

Beneficiary designations simplify transfer of assets at death and usually avoid probate.

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Re: Joint Investment Account with spouse? Any reason to do this?

Post by AltaRed » 17 May 2017 13:47

I've never done an irrevovable beneficiary designation for any of my assets and don't see why I should (unless mandated otherwise). Also, where possible, I designate primary and contingent beneficiaries.
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Re: Joint Investment Account with spouse? Any reason to do this?

Post by SkaSka » 17 May 2017 13:53

Thank you for the responses twa2w and AltaRed!

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Re: Joint Investment Account with spouse? Any reason to do this?

Post by Wing » 19 May 2017 18:36

Wallace wrote:
12 Mar 2017 10:30
Don't forget one of the biggest issues - what happens if a spouse suffers a catastrophe but does not die.

If spouse has a ruptured brain aneurism or a vehicle accident and is in a comatose state, the bank (if it knows about it) will freeze the spouse's accounts. This happened to friends of ours some years ago. Both were young and had not thought through any of these eventualities. The wife had no independent income and was reduced to rolling pennies and the support of friends until her husband came out of his coma (six weeks later).

Power of attorney for finances and health care decisions is key no matter how old (young) you are.
Should it be a JTWROS account for the couple, one being physically/mentally incapable will not be an issue for the other spouse. Thus no need for POA.

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Re: Joint Investment Account with spouse? Any reason to do this?

Post by Wing » 19 May 2017 18:48

SkaSka wrote:
11 Mar 2017 22:42
I'm not sure if I'm completely understanding what the optimal solution is for setting up non-registered, joint investment accounts with a spouse.

My wife and I are nearing the point where our registered accounts will be filled (TFSA and RRSP) for the year.

We are in our 30s and have RBC Direct Investing accounts holding our respective TFSA and RRSP accounts.

Would the optimal solution moving into non-registered, investment accounts be to:

- create a Joint Investment Account under my account, with my name first and my wife's name second
- create a Joint Investment Account under my wife's account, with my wife's name first and my name second
- put equal amounts of investments into each account - i.e. every month buy $1,000 worth of VCN in both accounts

Thank in advance!
I'm in a similar point now and found it's possible for your heirs (should you have named others than your wife in your will and whether you've made it clear the JTWROS assets are intended for your spouse) to protest your JTWROS asset going straight to your wife if the beneficial ownership is challenged. Since some people setup JTWROS with the intention to avoid probate fees and that transferring of assets into JTWROS accounts only may transfer legal ownership but not beneficiary ownership. When this intention is being challenged, then it's not as straightforward a scenario. Your provincial gov't, depending on the situation, may put your JTWROS assets to go through probate (thus charging probate fees) as well if they have reasons to believe there was no transfer of beneficial ownership.

So, JTWROS is a good tool but not 100% bullet proof. Precautions on other fronts are still necessary.

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Re: Joint Investment Account with spouse? Any reason to do this?

Post by AltaRed » 19 May 2017 19:37

I've never heard a situation in family law where JTWROS accounts going to the survivor(s) were not honored by financial institutions (except perhaps if a spouse opened JTWROS accounts with his/her own children shutting out a spouse (or more probably a step parent to the children), all challengeable I imagine in the courts - Will contestation for example.

Wing, POAs are required for other things like real property, automobile registrations, etc. You seem to want to try and discount (eliminate) certain documents on the basis something else, e.g. JTWROS accounts, solve everything. As stated elsewhere, there is no substitute for a POA (enduring in my opinion), Will and Health Directive. Your family and administrators will thank you.

SkaSka, regarding the 2 JTWROs accounts you speak of. A nitpick but there is nothing maigic about equal amounts of investments in each account. Indeed, it is somewhat unlikely each spouse will contribute the same amount of his/her earnings into investments at any given time. Remember it is 'her' money that needs to go to 'her' JTWROS account, and 'his' money that needs to go to 'his' JTWROS account. It could happen though if household expenses are shared disproportionately (perfectly legal) so as to create the ability to make 'equal' contributions. One could decide to have the 2 investment portfolios mirror each other in terms of asset allocation and product selection. That is a decision the couple needs to take, i.e. one could disproportionately invest ex-Canada and the other Canada, for example, or one could have a more conservative allocation (more likely in my estimation since it would be rare for both individuals to have the same risk tolerance).

FWIW, for the decades my spouse and I invested together, our 2 JTWROS accounts never had the same portfolio nor did they have the same asset allocation. We chose NOT to have the same investments in each account, e.g. if she had RY in hers, I might have TD in mine. OTOH, if they would have been ETFs, then yes, one could argue mirror images makes more sense.
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