![]() ![]() When the account owner dies, the beneficiary simply needs to supply a death certificate to the financial institution, and the assets will be transferred.The previous example of a potential 4.5% state inheritance tax on any portion of the account value would be completely avoided. If the beneficiary passes before the account owner(s), nothing happens.There are a few benefits that this type of account has over a JWROS account. This is simply adding one or more beneficiaries to your account. Most financial institutions will allow you to structure an account “Transfer on Death,” or TOD. If the purpose of adding a joint owner to your account(s) is to give them access to your assets upon your death, there’s a better way to do it. In Pennsylvania, where my office is located, the inheritance tax to a child would be 4.5% if assets are passed to a lineal decent. In this scenario, the assets would transfer back to the parent, and depending on the deceased’s state of residence, state inheritance tax could be due on 50% (or more) of the account value. If a parent adds a child to their $500,000 savings account and the child predeceases the parent, a portion of the account value could be includable in the child’s estate for state inheritance/ estate tax purposes.For example, if a parent has a $500,000 account and they make it a JWROS account, naming their child as co-owner, and the child makes a $20,000 withdrawal, they have in effect received a gift $3,000 above the annual gift tax exclusion. citizen can gift up to $17,000 per year tax-free to anyone they want, but if the gift exceeds $17,000, and the beneficiary is not a spouse, it could trigger the need to file a gift tax return. Adding anyone other than a spouse could trigger a federal gift tax issue.As previously stated, the assets automatically transfer to the surviving owner, regardless of what your will says. If the intent was for the remaining assets not spent during the family crisis to be distributed via the terms of a will, that’s not going to happen. ![]()
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