RBC Dominion Securities Joint Gift of Beneficial Right of Survivorship account — Considerations for successor accountholders

As part of their estate plan, a family member or friend may have opened a Joint Gift of Beneficial Right of Survivorship Account (JGBRS) at RBC Dominion Securities and named you as successor accountholder. Further to the terms outlined in the account opening documents, this article is intended to provide an overview of your rights and responsibilities with respect to this account and the securities therein, during the primary accountholder's lifetime and on their death. This article also includes a brief discussion of tax and other considerations relating to this account.

Any reference to a spouse in this article also includes a common-law partner.

Please note the JGBRS account is only available to Canadian tax residents (except for residents of Quebec). A Quebec resident, non-resident of Canada or minor child is not permitted to be an accountholder or successor accountholder of a JGBRS account.

What is a JGBRS account?

The RBC Dominion Securities JGBRS is a joint account which facilitates the retention of legal and beneficial ownership of the account (including the securities of the account) by the primary accountholder during their lifetime, while gifting the beneficial entitlement to the right of survivorship in the account to any family members or friends named as successor accountholder(s). The terms of the RBC Dominion Securities client account agreement governing the JGBRS account expressly state that the intention of the accountholder at the time of account opening is to make an inter vivos gift, at the time of account opening, of the beneficial entitlement to the right of survivorship in the account. Neither the account nor the securities therein are gifted at the time of account opening to you, the successor accountholder. This means you, as a successor accountholder, don't have any entitlement to, or control over, the account or its securities until the death of the primary accountholder. As successor accountholder, you will not be permitted in your personal capacity to receive any information about or provide any instructions in relation to the account while the accountholder is alive, or to withdraw funds from the account. The accountholder retains sole control of the account during their lifetime. They can freely withdraw assets from the account and are not obligated to retain any assets in the account.

On the death of the accountholder, legal and beneficial ownership of the account and the securities held in the account will transfer to you, the successor accountholder(s). Upon presentation of a death certificate, the name of the deceased accountholder will be removed from the account so that the JGBRS is subsequently held in your name(s) without requesting probate. If there are multiple successor accountholders, each of you will hold your portion in equal shares as tenants in common (unless written instructions are to convert the account to a joint tenant with right of survivorship account).

Who can provide instructions on the account?

During the accountholder's lifetime, only the accountholder can provide instructions, trade on the account or make withdrawals. You will not be entitled to receive information about the account, give instructions on the account or make a withdrawal, unless the accountholder has provided their express authorization and named you as their power of attorney for property, trading authority or interested party.

After the accountholder's death, upon presentation of a death certificate, you will become the legal and beneficial owner of the securities that remain in the account. At that time, you will be able to provide instructions and make withdrawals from the JGBRS account.

Tax considerations

During the accountholder's lifetime

The accountholder is the 100% beneficial owner of the securities in the JGBRS account during their lifetime and will be responsible for reporting all of the income and capital gains earned in the account on their personal tax return. As successor accountholder, you don't report any income or capital gains on your personal tax return(s) during your lifetime.

On the accountholder's death

On the accountholder's death, there's a deemed disposition of 100% of the securities in the JGBRS account at fair market value (FMV), unless you're the spouse of the deceased (in which case the securities would generally roll over to you at the deceased's adjusted cost base (ACB)). Any capital gains or losses realized as a result of this disposition are reported on the deceased's terminal tax return and subject to tax at their marginal tax rate. It's important to note that this deemed disposition is not reported on any tax slip. The accountholder's executor will be responsible for properly reporting this deemed disposition on the deceased's terminal tax return with the assistance of a qualified tax advisor. As well, the accountholder's estate will be responsible for paying any taxes that may be owing as a result of the deemed disposition triggered on death.

The securities in the account will pass directly to you, the successor accountholder(s) (in equal shares if there's more than one successor accountholder living at the accountholder's death). For income tax purposes, provided you're not the deceased's spouse, you will acquire the securities in the account at the FMV as of the date of death. This will become the ACB of these securities in the account going forward. If you own the identical securities in other non-registered accounts, you will generally need to average the ACB with those securities. This is something you'll need to track with the assistance of a qualified tax advisor.

It's important to note that the ACB of these securities will not automatically be updated by RBC Dominion Securities and will only be updated to the FMV on the date of death upon your instructions. Going forward, you will report the income and gains earned in the account on your personal tax return. If there are multiple successor accountholders, each of you will report an equal share of the income and capital gains earned in the account.

In the year of the accountholder's death, you may receive tax slips for the entire year's worth of income and capital gains (losses) earned in the account, which may include income and gains earned in the account by the deceased prior to death. You'll need to work with the deceased accountholder's executor and a qualified tax advisor to determine what income and capital gains (losses) should be reported to the decedent's estate and what income and capital gains (losses) should be reported in your individual return(s).

Probate considerations

Although RBC Dominion Securities does not generally require probate to allow the assets in a JGBRS account to pass to the successor accountholder(s), it's important that you, as successor accountholder (and potentially an executor of the accountholder's estate) seek advice from a qualified legal advisor regarding this account. There may be circumstances in which the assets in the account may need to be included in an application for probate at the time of the accountholder's death, such as if a third party makes a claim to the assets in the account.

Other considerations

- On the accountholder's death, the securities in the JGBRS account pass directly to you. As a result, they may not be available to the deceased accountholder's executor. You may pay any tax liability resulting from the deemed disposition of the securities in the JGBRS account on their death. The accountholder's executor may be required to issue other estate assets to pay any taxes owing on these securities. If there are no other estate assets, the executor may be left with an insolvent estate.

- You will only receive the securities in the JGBRS account on the accountholder's death if you're living at the time of their death. If you predecease the accountholder, your share of the securities will not be paid to the heirs of your estate; instead they will be paid to the heirs of your successor accountholders who are living at the time of the accountholder's death. If there are no other successor accountholders, then on the accountholder's death, the securities will form part of the accountholder's estate and be distributed as per the accountholder's will, or, if there is no will, provincial or territorial intestacy laws.

It's important to understand your rights and obligations regarding your accountholder's estate. If you have concerns or questions about this arrangement, you should consult with the accountholder as well as a qualified lawyer and tax advisor.

This article may contain strategies, not all of which will apply to your particular financial circumstances. The information in this article is not intended to provide legal, tax or insurance advice. To ensure that your own circumstances have been properly considered and that action is taken based on the latest information available, you should obtain professional advice from a qualified tax, legal and/or insurance advisor before acting on any of the information in this article.