# Transferring assets to joint account with adult child



## voyager (Oct 13, 2018)

Hello all,

I am widowed and want to add my son as a joint owner with right of survivorship on my brokerage account. I want to do this for three reasons: 1) It is my intention the account should pass entirely to him upon my death. 2) I want to avoid probate fees 3) I want to keep things simple. I intend to continue to report any income from investments in this account myself during my lifetime.

It is my understanding that when moving assets that have appreciated in value from a personal account into a JWROS account with anyone other than a spouse, this is treated by the CRA as a "deemed disposition." In other words, if I transfer my investments "in kind" from my current account to a newly created joint account with my son, I am required to pay any capital gains tax in the year the joint account is opened even if I don't actually sell the investments. 

RBC, for example, specifies that any securities transferred in this type of scenario are reported as deemed dispositions on the T5008 trading summary.

Here's where I'm confused: My bank (TD) says they DO NOT report such transfers (from solo to JWROS with adult children) on the T5008 trading summary. However I want to pay the capital gains before I transfer the securities to lessen any capital gains taxes due by my son later on. 

Does this mean I must actually sell my investments if I want to pay cap gains tax now? Or can I self-report a "deemed disposition" and elect to pay the tax even if I don't sell the shares? 

The annoyance of having to sell and then repurchase all of my holdings, and having to pay commissions for each transaction, seems rather cumbersome. Can anyone shed any light on this? The bank seems reluctant to provide any information. 

Thank you


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## AltaRed (Jun 8, 2009)

Whether you have a JTWROS account with your son, or your assets are willed to your son from your individual account, cap gains taxes will be paid by your estate when you die. Your son is NOT burdened with cap gains taxes from the assets in your account in either case. There is no purpose in electing to pay cap gains taxes now.

I don't know enough to know* why RBC DI would 'show' these as deemed dispositions on a T5008 and TDDI would not. As long as you continue to report 100% of the investment income each year and 100% of the cap gains/losses on any investments physically sold, there should be no issue. Just make sure it is your SIN number that is on the JTWROS account. There is no need to physically sell the assets (and re-buy them) to trigger a 'deemed disposition but you don't want to have a deemed disposition in any event. It makes no sense.... defer the tax until you die.

* I have read somewhere and it may be a CRA bulletin or a TaxTips articles that CRA will assume that JTWROS account assets are considered 50/50 in such an account change and will assume cap gains must be paid on 50% of the assets "sold". I don't know if that is true and that may be why RBC DI is saying what they say. Seems arbitrary to me (and wrong).


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## voyager (Oct 13, 2018)

Thank you AltaRed. Some of these are investments I purchased many years ago and that have appreciated considerably and undergone several stock splits. My thinking is that in paying cap gains now and repurchasing the shares (or going the deemed disposition route), the capital gains payable by my estate later on will be lower, regardless of what the market does, due to the new (higher) cost base. So potentially less money for my son to have to part with when the joint account passes to him. But especially, it makes sense for me to pay (at least some) cap gains in 2018 since I will have significant medical expenses and unused amounts I can transfer from my late spouse that can offset the extra tax somewhat.



AltaRed said:


> * I have read somewhere and it may be a CRA bulletin or a TaxTips articles that CRA will assume that JTWROS account assets are considered 50/50 in such an account change and will assume cap gains must be paid on 50% of the assets "sold". I don't know if that is true and that may be why RBC DI is saying what they say. Seems arbitrary to me (and wrong).


I have also come across this, which is why I am surprised that TD DI will not comment on CRA implications whatsoever. 

RBC Wealth Management, on the other hand, has detailed literature on their joint accounts that specifies: 

"At RBC Dominion Securities, transfers from sole ownership accounts to JTWROS are reported on Summary of Security Dispositions at FMV for 100% of assets transferred in. Exception if opening account with spouse (...) The amount of deemed disposition to report on the deceased's terminal tax return at death depends on how transfer-in of assets was reported at account opening and who has beneficial ownership of the account for tax purposes"

They also offer a different type of joint account called JGBRS (Joint Gift of Beneficial Right of Survivorship) for which they indicate: "No taxable disposition at time of opening the account (...) [Upon death of accountholders] Deemed disposition of 100% of the account at fair market value (unless assets pass to a spouse.)"

TD DI say they have only one type of joint account and it comes with right of survivorship, but beyond that, no further details are provided.


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## Spudd (Oct 11, 2011)

I thought that having a named beneficiary on your account would avoid probate as well. It seems to me that just doing that would accomplish all your goals.

http://www.nilsonco.com/insight-past/rrsp_beneficiaries/


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## AltaRed (Jun 8, 2009)

Spudd said:


> I thought that having a named beneficiary on your account would avoid probate as well. It seems to me that just doing that would accomplish all your goals.
> 
> http://www.nilsonco.com/insight-past/rrsp_beneficiaries/


Can't name beneficiaries in non-registered accounts.


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## Spudd (Oct 11, 2011)

AltaRed said:


> Can't name beneficiaries in non-registered accounts.


Wow, I had no idea. Sorry for the bad advice, then!


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## voyager (Oct 13, 2018)

AltaRed, thank you. I replied to your earlier message but it appears my message is still awaiting moderation...

In the meantime, In the RBC Wealth Management document on joint accounts, this is what it says:

At RBC Dominion Securities, transfers from sole ownership account to JTWROS are reported on Summary of Security Dispositions at fair market value for 100% of assets transferred in. Exception if opening account with spouse. (2)"

Footnote 2) "At RBC Dominion Securities, all transfers from sole name accounts to tenants in common accounts or JTWROS accounts are done at fair market value, triggering a 100% disposition that is reported to you on the Summary of Security Dispositions. It is important that you seek advice from a qualified tax advisor on how to report this transaction. For example, when transferring assets into a JTWROS account with only one other person, the CRA takes the position that the original owner of the assets has disposed of one-half of his/her interest in the assets for proceeds equal to 50% of the fair market value of the property. The amount, if any, of disposition to report on the transferee's tax return at the time of the account opening depends on whether there was a change in beneficial ownership."

I am perplexed as to why the two banks would not apply the same rules. In any event, it's very unclear.

That RBC document is found here: ca.rbcwealthmanagement.com/documents/241512/241533/Joint+Accounts+08-30-2017.pdf/f3b97b24-f00d-4b77-b030-d86ef6e73a5c


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## OhGreatGuru (May 24, 2009)

Theoretically it's possible. It's called joint ownership in which one partner does not have a "beneficial interest" until the other dies.

However, as you have found, some financial institutions aren't prepared to handle it, for whatever accountability reasons.

Some financial advisors recommend preparing a "side agreement" stating the intention is for estate planning purposes, and not to convey beneficial interest. But I have seen one financial site say that this may result in the assets being subject to probate, on the grounds that there was no "unity of interest" amongst the parties. Perhaps this is why RBC doesn't want to allow it. 

CRA seems to be willing to defer the capital gains taxes until death of the first owner. But it sounds like some provincial laws (Probate is under provincial law) aren't willing to play along and allow this form of JWROS pass outside of the estate. I wish the different levels of government would get together on their rules.


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## AltaRed (Jun 8, 2009)

I have read and heard that CRA will assume equal splits among owners for tax purposes absent any other documentation. About all I know about it.

Not a good thing if deemed disposition is triggered.


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## OnlyMyOpinion (Sep 1, 2013)

1) It is my intention the account should pass entirely to him upon my death. - That is what your will is intended to convey.
2) I want to avoid probate fees - A poor reason to make changes. Probate may be an irritant but it is not onerous, and you won't be caring by then anyway.
3) I want to keep things simple. - See answer to #1 above.


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## fireseeker (Jul 24, 2017)

Voyager, I think you have described two issues, which perhaps should be treated separately.
The issue of setting up a joint account -- and the rules that will apply to it -- is one issue. Like you, I would like to know clearly how to accomplish this and what the rules are. Alas, I don't have any specific knowledge.
The second issue is what to do with your current, and presumably growing, capital gains liability. Most of the advice above has been to defer triggering cap gains, leaving it for your estate or son to pay when the time comes.
However, you mentioned medical expenses and some kind of transfer amounts from your late husband. In that case, I agree with your thinking -- intentionally triggering some cap gains in 2018 when you have offsetting liabilities or a lower income is smart.
In fact, depending on your age (and projected lifespan) and your annual income, triggering cap gains annually (using marginal tax thresholds as a guide) can be a tax-smart move for your beneficiaries.
I have helped my 90-year-old MIL do just over the past three years, triggering a gain each year that attracted only modest taxation. Paying it all in one year would have been much more expensive.
It sounds like you are being extremely thoughtful in organizing your affairs. This is a generous and wonderful gift to your family.


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## AltaRed (Jun 8, 2009)

I agree it takes someone with tax software (or a tax calculator like taxtips.ca) to determine where one's marginal tax rate is, to determine how much cap gains to take. That said, there needs to be a mechanism to cause cap gains to be triggered such as a real disposition (sale of assets) or a deemed disposition such as an actual gift to another party such as an adult child. Converting an individual account to a JTWROS account is not a really good way to do it for all the reasons mentioned, e.g. side agreements or documentation to prevent CRA assuming 50/50 beneficial ownership. 

In the case of RBC DI, one could control how much is a deemed disposition on the T5008 by simply moving X amount of assets from the individual account to the JTWROS account for deemed cap gains purposes, but that also now means the son actually owns 50% of the assets (via gifting) in the JTWROS account.

It seems to me that if the purpose for doing this is primarily cap gains tax purposes, then the fact the JTWROS account eventually bypasses probate is just a side benefit. Too many people use JTWROS accounts with others than their spouse for a variety of bad reasons. Probate fees are a minor irritant in the broad scheme of things.

Not that it matters for the OP, but I have huge unrealized cap gains in my non-registered account. It really is no big deal for the estate to pay cap gains taxes on these funds even if in one of the highest marginal tax rates. There are simply too many negatives to having a non-spouse with an undivided interest in an investment account.


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## voyager (Oct 13, 2018)

What is becoming clear is the issue of beneficial ownership is key to determining the tax implications. 
Interestingly, RBC in fact offers two types of joint accounts, one with immediate beneficial ownership JTWROS (thus triggering the cap gains upon opening) and another conferring the right to beneficial rights upon the death of the first accountholder. They call this JGBRS, or Gift of Beneficial Right of Survivorship. In the first case, cap gains are "triggered" through deemed disposition, both accountholders are deemed to have equal beneficial ownership and report income accordingly. In the second case, the primary accountholder continues to report all the income from the account, the survivor has no rights or access to the account during the accountholder's lifetime, and assumes beneficial ownership only upon the death of the primary accountholder.

TD DI's joint account (referred to simply as a "joint account with right of survivorship") seems to be somewhere in the middle. No cap gains triggered at opening, the "primary" accountholder continues to report the income during their lifetime, even though the joint owner theoretically has full access, and assets are only deemed to be disposed of upon death of the accountholder. The bank rep made no mention of legal ownership vs beneficial ownership considerations.

It is just bizarre that these things are not uniformly presented by all banks.

Regardless, for reasons mentioned above, I will in any event take some gains this year rather than let the credits/expenses go to waste. StudioTax should help me here.

As to probate, at a rate of 1.4 per cent of assets over $50,000, it is certainly not negligible. 

Thanks to all who weighed in. I'm glad I found this forum.


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## OnlyMyOpinion (Sep 1, 2013)

Voyager, Good, it sounds like you are getting a handle on your options and implications.
Here is a link to Lynne Butler's's blog which discusses some of the issues as well. I've posted it before, maybe on FWF: https://estatelawcanada.blogspot.com/search?q=Joint+account

As to creating a joint acount primarily to avoid the Estate Administration Tax ('probate'), people certainly do it. They seem to usually get away with it. 
I can't see that lasting if growing numbers of people plan to circumvent it. The rules will change to recapture it. Perhaps we'll join the rest of G7 countries and implement a true inheritance tax. Or maybe our kids will just pay higher taxes in the future. I read recently that there is 750 billion dollars of 'inheritance' due to change hands in the upcoming decade. Ceasar will want his due I'm sure.


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