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Author: jamiegumm One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76384  
Subject: Gift tax on joint accounts or POD Date: 9/22/2010 11:28 AM
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If one sets up joint ownership on accounts, what are some of the interstices as regards GT of the varying types, e.g., bank, IRAs, and when and who pays gift tax and which amounts currently reach such a threshold?

Albeit a bit old, according to a family estate planning book, the authors state that if the gift consists of a bank act., gift tax is not due until the joint owner puts it in his name? So if such occurs, assuming postmortem to the original owner, the survivor would file a federal gift tax form (any NYS equivalent?) or would this happen on the decedent's final return.

And further paraphrasing the book, if the gift involves real estate or securities, the gift is payable immediately. Is this correct and payable by whom?

Until reading this, I assumed an inherited IRA would pay no gift tax or are there some nuances of which I am unaware?
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Author: drippinfool Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67549 of 76384
Subject: Re: Gift tax on joint accounts or POD Date: 9/22/2010 12:44 PM
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I thought inheritances and gifts were two distinct entities, with different tax treatment. But I'm no expert.

-drip

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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67550 of 76384
Subject: Re: Gift tax on joint accounts or POD Date: 9/22/2010 1:16 PM
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Albeit a bit old, according to a family estate planning book

I'd get a very recent book from the library - everything about estate has been changing.

If you are primarily interested in the treatment of inherited IRAs, look at irs.gov or post on the tax board here.

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Author: madbrain Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67552 of 76384
Subject: Re: Gift tax on joint accounts or POD Date: 9/22/2010 7:09 PM
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jamiegumm,

I believe your book is wrong about gift tax. How current is it ?

See http://findarticles.com/p/articles/mi_m3257/is_n9_v50/ai_187...

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67553 of 76384
Subject: Re: Gift tax on joint accounts or POD Date: 9/22/2010 8:11 PM
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jamiegumm: "If one sets up joint ownership on accounts, what are some of the interstices as regards GT of the varying types, e.g., bank, IRAs, and when and who pays gift tax and which amounts currently reach such a threshold?"

You cannot have a joint IRA; the I in IRA stands for individual.

Donors pay gift tax; donees almost never pay gift tax (IIRC, there are some rare exceptions).

"Albeit a bit old, according to a family estate planning book, the authors state that if the gift consists of a bank act., gift tax is not due until the joint owner puts it in his name?"

Not exactly.

"So if such occurs, assuming postmortem to the original owner, the survivor would file a federal gift tax form (any NYS equivalent?) or would this happen on the decedent's final return."

Gift tax returns are different than income tax returns.

"And further paraphrasing the book, if the gift involves real estate or securities, the gift is payable immediately."

Not exactly.

"Until reading this, I assumed an inherited IRA would pay no gift tax or are there some nuances of which I am unaware?"

As someone notd, inheritance (potentially subject to estate tax, except in 2010) and gifts are two different things. drippinfool is correct.

DIY estate planning is generally a bad idea. Problems often do not arise until it is too late to fix them.

rad and madbrain also gave good information.

What is that you are trying to accomplish?

I have not looked at either of the following sites in a long time, but I have them bookmarked:
http://mtpalermo.com/httoc.htm
http://www.giftlaw.com/glaw_website.jsp

I am not vouching for either site.

Fairmark is an excellent site.

http://www.fairmark.com/begin/gifts.htm

A long time ago, Kaye Thomas posted directly on TMF.

http://fairmark.com/category/estate-and-gift-tax/

None of the above post considered any state law implications.

Good Luck, JAFO

Disclaimer

Yes, I am a lawyer (and not a T&E lawyer), AND THIS IS NOT LEGAL ADVICE; it is only general information. NO CLIENT RELATIONSHIP IS INTENDED TO BE CREATED, NOR IS ANY SUCH RELATIONSHIP SO CREATED. FOR SPECIFIC LEGAL ADVICE YOU SHOULD TALK TO A LAWYER IN YOUR AREA.

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Author: jamiegumm One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67556 of 76384
Subject: Re: Gift tax on joint accounts or POD Date: 9/23/2010 4:49 PM
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Thanks all for the help. Upon second look, I realize the book referenced was quite old from 1987. Quite simply, I am/was just wondering if when folks set up beneficiaries (to avoid probate or whatever) on IRAs or individual mutual fund accounts and suchlike, it might trigger some gift tax issues when non-spouse inheritance actually occurs. Or how a similar situation would occur with a jointly held, say savings account.

Say, for instance, my brother died having named me as beneficiary on an IRA, so there would be no surprise/special taxes for me, assuming a modest amount inherited.

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Author: TwoCybers Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67557 of 76384
Subject: Re: Gift tax on joint accounts or POD Date: 9/23/2010 5:02 PM
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Two common sense points

#1 If you want financial planning/advise get professional help. You already have relied on a book written before Clinton was President. The laws change, change a lot.

#2 Don't worry about your brother's death causing tax problems. Trust me even the US Congress will not tax inheritance at more than 100% rate.

Gordon
Atlanta

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Author: jamiegumm One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67558 of 76384
Subject: Re: Gift tax on joint accounts or POD Date: 9/23/2010 5:19 PM
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OK, if a non-spouse relative set up a sizeable savings account as jointly owned, the donor would likely owe a gift tax on half of the amount, then? I can't recall but do regular banking/checking accounts allow one to set up merely a "shadow" joint owner under payable on death (POD)?

Just for anyone else's help, for our edification, I seem to recall a question on a jointly-owned inherited home once on my local "Tax Lady" show. Wherein the sickly old matriarch deeded her long-owned family home to her four living children under tenants in common, if memory serves. Fast-forward a few months ahead past Oldy's death whose kids were looking to sell the homestead. (Please correct me if I am getting something following wrong!) Under this scenario, then there would be no stepped-up basis, so they would have to go all the way back decades to the original purchase price as their basis, somehow split four ways, right? What would have been the best way to handle such situation.

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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67559 of 76384
Subject: Re: Gift tax on joint accounts or POD Date: 9/23/2010 5:31 PM
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If you just say what it is you would like to do, it would be much easier for people to give you suggestions on how to do it.

And again, estate stuff is way in flux at the moment so for some of your questions, it depends on when the person dies. 2010 is a really good time to die if you're concerned about estate issues. Well, at least so far.

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Author: Donna405 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67560 of 76384
Subject: Re: Gift tax on joint accounts or POD Date: 9/23/2010 6:59 PM
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You are asking complex questions. I suggest you go to the "Financial Planning - Tax Strategies" Board and inquire there. It is staffed by highly knowledgeable public accountants and CPA's as well as former IRS employees.

However, you need to get your thoughts in order, i.e., what is it you wish to do to avoid taxes?

Donna

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67561 of 76384
Subject: Re: Gift tax on joint accounts or POD Date: 9/23/2010 7:56 PM
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jamiegumm: "Say, for instance, my brother died having named me as beneficiary on an IRA, so there would be no surprise/special taxes for me, assuming a modest amount inherited."

No special taxes for you.

IIRC, the IRA would be included in yoru deceased brother's estate for tax purposes.

Assuming that the IRA was a regular IRA and not a Roth IRA, you would owe income taxes on withdrawals. Also, depending upon the age of your brother at his death, you would also, IIRC, be required to continue his RMDs or withdraw it all in less than 5 years after the year of death, unless you started your own RMDs within first year after death.

No tax or legal advice intended or given.

You are asking very complex questions and appear to be hoping for a yes or no answer.

Regards, JAFO

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67562 of 76384
Subject: Re: Gift tax on joint accounts or POD Date: 9/23/2010 8:13 PM
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jamiegumm: "OK, if a non-spouse relative set up a sizeable savings account as jointly owned, the donor would likely owe a gift tax on half of the amount, then?"

No. Bank accounts have special rules, as someone alluded to yesterday.

"Generally, if A transfer funds into a joint A/B account is not a gift--it becomes a gift if and when B choses to withdraw it or move it to a B only account."

"There is no completed gift yet to B because it's just as likely that A might take out the $ as it would be for B to take it out. Once B withdraws it [for her own use] or otherwise is the only one who can withdraw it, there is a completed gift subject to gift tax (or estate tax if the transfer occcurs at death)."

And you have not yest asked about, and no one else has mentioned the lifetime gift exemption amount.

The the donor might have to file a gift tax return, but unless the gift was a huge amount (or the donor previously fully used the lifetime exemption amount) probably no tax would be due.

"I can't recall but do regular banking/checking accounts allow one to set up merely a "shadow" joint owner under payable on death (POD)?"

No. Either the person is a joint owner, with rights to withdraw, or the person is POD, but I have no idea what a "shadow joint owner under payable on death" would be.

"Just for anyone else's help, for our edification, I seem to recall a question on a jointly-owned inherited home once on my local "Tax Lady" show. Wherein the sickly old matriarch deeded her long-owned family home to her four living children under tenants in common, if memory serves. Fast-forward a few months ahead past Oldy's death whose kids were looking to sell the homestead. (Please correct me if I am getting something following wrong!) Under this scenario, then there would be no stepped-up basis, so they would have to go all the way back decades to the original purchase price as their basis, somehow split four ways, right?"

Yes.

"What would have been the best way to handle such situation."

For the old lady to avoid DIY estate planning and get some professonal advice. As I noted yesterday, one downside of DIY estate planning is that the problems often do not arise until it is too late to correct the problem.

Also, with Medicaid lookback periods, 5 years IIRC, the elderly (especially the ill elderly) need to be wary about giving away assets.

Also, US IRC 2035 contains a three year lookback for gifts made before death, which adds the value back to the estate. http://codes.lp.findlaw.com/uscode/26/B/11/A/III/2035

I repeat, DIY estate planning is generally a very bad idea.

I am a lawyer and will not do my own estate planning independent of a professional advisor.

Regards, JAFO

"NO legal or tax advice intended or given. Consult your own lawyer or tax advisor.


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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67563 of 76384
Subject: Re: Gift tax on joint accounts or POD Date: 9/23/2010 8:22 PM
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I repeat, DIY estate planning is generally a very bad idea.

I am a lawyer and will not do my own estate planning independent of a professional advisor.




as someone who just spent his summer going through the process (and ex-lawyer) :: Hear hear.


looked at DIY and on-line and am glad i used a professional.


=

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Author: TwoCybers Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67564 of 76384
Subject: Re: Gift tax on joint accounts or POD Date: 9/24/2010 1:36 PM
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OK, if a non-spouse relative set up a sizeable savings account as jointly owned, the donor would likely owe a gift tax on half of the amount, then? I can't recall but do regular banking/checking accounts allow one to set up merely a "shadow" joint owner under payable on death (POD)?


So how big is "Sizeable"? 1 million, several millions, many millions?

There is no inheritance tax until you exceed a million. But keeping a million in a bank account in my view is stupid. FDIC insurance tops out at $250,000

Gordon
Atlanta

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67565 of 76384
Subject: Re: Gift tax on joint accounts or POD Date: 9/24/2010 1:38 PM
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TwoCybers: "So how big is "Sizeable"? 1 million, several millions, many millions?

There is no inheritance tax until you exceed a million. But keeping a million in a bank account in my view is stupid. FDIC insurance tops out at $250,000"


There is no federal inheritance tax.

There may be a federal estate tax.

Some states have an inheritance tax instead of (or perhaps in addition to [but I do not know]) an estate tax.

Regards, JAFO

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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67566 of 76384
Subject: Re: Gift tax on joint accounts or POD Date: 9/24/2010 3:59 PM
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There is no federal inheritance tax.

There may be a federal estate tax.

Some states have an inheritance tax instead of (or perhaps in addition to [but I do not know]) an estate tax.




a subtle ,but important, distinction most of us don't understand.


why some of us just lump them all together and call them "Death Panels Tax"


(>,

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