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Author: TaxService Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 123001  
Subject: Re: Tax consequ. of TOD registration Date: 8/15/1999 11:59 AM
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Need to change the registration on some tax certificates (clerical change really ) and was wondering what the tax consequences would be of adding an additional name as a TOD (transfer on death) - - - upon my passing does the stock then transfer to them, tax free - and if so what would be their cost basis...
(I have checked and in my state TOD is recognized)

Thanks in advance -
Just wondering if registering it this way will make it easier or save any in taxes...

***In any case, upon your demise, your beneficiaries receive a stepped up basis in the property. Their basis is the value as of the date of your demise (possibly a later alternate date). When the property is sold, the resulting gain/loss is reported on their personal tax returns as long term capital gain/loss. Your beneficiaries are not taxed on the inheritance. It is your estate that is subject to tax, if it is large enough.

Individual shares of the inheritance may be taxed, at the state level (if your state has an inheritance tax), based on the relationship of the beneficiary to the benefactor.

Completed gifts (an interest not to exceed $10,000, to any one person, in any one year) would afford no current tax consequence to you or the beneficiary. It would serve to reduce the size of your estate (could be a benefit), but the basis in the property gifted would be your current basis. The tax on your estate, if any, would be reduced. The tax benefit to your beneficiaries, upon sale of the asset, could be diminished.

Completed gifts, in excess of the $10,000 mentioned, would require that you file a gift tax return. At some point, these gifts could become taxable, if your gifts exceed certain amounts during your lifetime. If not taxable during your lifetime, taxability would be reckoned with based on your amount of giving and the size of your taxable estate.

If you have a sizeable estate, it probably would be a good idea to consult an attorney/financial planner to protect your estate, and shelter what you plan on leaving your beneficiaries.

Best wishes for a long, healthy, and happy life!!!=:)

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