If You Want to Exclude an Asset from Equalization, Be Careful Using Joint Accounts


Under Ontario legislation, some property, such as gifts from a third party to a spouse, can be excluded from that spouse’s net family property calculation for equalization. Yet, property gifted to one spouse may be shared with the other spouse. This may occur if assets are deposited into an account jointly owned by the spouses, as the contents can be deemed jointly owned. Additionally, property not kept separate but co-mingled with family assets may lose its excluded status. How are “excluded” assets traced between accounts, and will funds lose their excluded status every time they are placed into a joint account? 

Family Law Act Presumes Ownership of Property in a Joint Account 

The Family Law Act creates presumptions regarding the ownership of property for married parties. Section 14 provides that:

(a) the fact that property is held in the name of spouses as joint tenants is proof, in the absence of evidence to the contrary, that the spouses are intended to own the property as joint tenants; and 

(b) money on deposit in the name of both spouses shall be deemed to be in the name of the spouses as joint tenants for the purposes of clause (a).

This presumption suggests that money deposited into a joint bank account during the marriage is intended to be jointly owned. However, the party seeking to exclude the joint ownership characterization of such funds may be able to rebut the presumption. Also, parties wishing to maintain sole ownership of specific funds or who wish to exclude eligible assets from equalization may need to document and trace the sources of those funds. This can be important for some categories of excluded property. For instance, section 4(2)5 of the Family Law Act provides that property (other than a matrimonial home) from which money received as a gift or inheritance can be traced is excluded.  

Belgiorgio v. Belgiorgio dealt with the application of the Family Law Act provisions to an inheritance. The parties maintained a joint bank account through their marriage, and when the husband received an inheritance from his father’s estate, he placed funds in the joint bank account. Still, he sought to exclude the amounts from his net family property. While the husband regretted placing the funds in the joint account, the court could not be concerned with how he now felt about his actions. Instead, the court had to focus on his intentions when he deposited the money into the account. Justice Beaulieu did not doubt that the husband realized that the account in which he deposited his inheritance was jointly held with his wife. Income was pooled in this account, and expenses and purchases were paid from it, which characterized the funds in the account as family. While he now stated he would not have put the funds there if he had known they would lose their excluded status, this was made from the knowledge of his current situation. He failed to rebut the presumption under the Family Law Act. 


Will an Excluded Asset Lose its Status in a Joint Account? 

The intersection of property ownership and exclusions from a party’s net family property was examined in Townshend v. Townshend. In that case, the husband claimed an exclusion from his net family property for a $25,000 gift that he received from his mother. At trial, the husband claimed that the wife deposited the funds into a joint bank account against his instructions. While the trial judge did accept that the money was paid to the husband alone, it was found that the gift lost its excluded status when it was moved into the joint accounts. The husband appealed. On review, the Ontario Court of Appeal found that the trial judge erred in not granting the husband an exclusion for one-half of the amount of the gift. The wife cited Belgiorgio to support her argument that funds lose their excluded status if placed in a joint account. 

The Court of Appeal looked to an earlier decision in Colletta v. Colletta. That case also concerned a gift of funds placed into a joint account. However, in that case, the court allowed an exclusion for only half of the amount in the account in question as the account was joint. In Townshend, the court found this to be the correct approach. This is because in dealing with the property under the FLA, ownership must be determined before calculating the parties’ net family properties. Section 14 of the FLA contains presumptions over property ownership, but section 4(2) concerns exclusions from the net family property. In the court’s view, the legislature was clear that gifts used to purchase a matrimonial home should lose their excluded status but not money deposited into a joint account. Consequently, there was no “legislative intent that the entire amount of the gift should lose its excluded character when deposited into a joint bank account.” This meant that the trial judge erred in finding that all the gift money lost its excluded character when placed into the joint account. 


Joint Accounts May be Used as a Conduit for Excluded Funds

The approach of having an otherwise excluded amount from a party’s net family property is the approach recommended by Townshend once the property is put into a joint account. However, there can be exceptions to this if the joint account is simply used as a conduit. In Barrett v. Barrett, one of the issues the court had to deal with was how to characterize the $100,000 the wife received from her other as a gift. There was no doubt that the amount was a gift to the wife alone, so it could be listed as an excluded asset without impacting her net family property for equalization. However, the wife loaned $50,000 to the husband by transferring half of the gift from her personal account to the joint account, which the husband then used to pay off company debts. He also signed a promissory note to the wife for the $50.000. The husband argued that once the money was transferred to the joint account, it was co-mingled with existing funds, and consequently, the amount should be split with each listing $25,000 as an asset. 

The judge acknowledged the general rule that when a gift is deposited into a joint account, “it is deemed to be held jointly (comingled) and included in NFP 50% for each spouse”. The onus was on the wife to show that she could trace the money and that it was separated from jointly held property. In these circumstances, the judge found the intention was to provide the husband with a loan for business purposes, and the loan agreement was evidence that the $50,000 could be traced to the husband for his business. Though it did pass through the joint account, it was not comingled as it was simply a conduit to get the money to the husband. This meant that the $50,000 remained an excluded asset.

Onus of Proving an Exclusion is on the Person Claiming It 

In disputes about the characterization of assets and their treatment for equalizing the parties’ net family properties, courts may look at the intention of a donor in making a gift, including whether the gift was made to one spouse alone. However, whether an asset is excluded from net family property depends on the recipient’s subsequent actions after receiving funds, so parties should be aware of the impact of depositing assets into a joint account. Also, the Family Law Act places the onus of providing an exclusion on the person claiming it. It will often be fact specific whether a party can claim an exclusion. 

Windsor Family Lawyers Advising Clients on Complex Property & Asset Division

The lawyers at Howie Johnson Barristers and Solicitors in Windsor focus exclusively on family law matters for clients in Ontario. They will work with you to determine financial solutions tailored to your situation. To discuss your matter further or arrange a meeting, contact us online or call 519-973-1500.

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