![]() You can adjust this potential inequity with a simple change to the tax clause under your Will or Trust. As a result, other estate beneficiaries might bear the burden of paying the tax even though they do not receive the balance of the account. If your last will states that your estate shall pay the estate related taxes, the tax will come out of the estate and not from the surviving joint account owner. Allocation Of PA Inheritance Tax: There will be Pennsylvania Inheritance Tax on at least a percentage of the joint account.Additional Creditor Risk: The new joint owner’s creditors and/or divorcing spouse might have an increased ability to go after the funds in this now jointly owned account.Be aware that the remaining funds in the account will not transfer in accordance with your Will or Revocable Trust, so make sure that this result fits into your estate plan. Do You Want The Joint Owner To Inherit The Account? The surviving joint owner will inherit the entire account value upon your passing.Make Sure You Trust The New Joint Owner: The new joint owner will have complete access to the account assets and can legally remove assets from the account for any purpose.Some Cautions Before Adding Joint Owners To Your Accounts : Like almost everything else in the world, there are potential negatives that must be considered before making a final decision. Therefore, even though the account might have been highly appreciated during your lifetime, the beneficiary would only need to pay capital gains tax on the sale of the account assets if they appreciate beyond the value as of your date of death.Īs outlined above, there are some great benefits to adding a joint owner to a personal account. Step Up In Basis Is Intact: Because the addition of a joint owner to your account is not considered a completed gift and because the IRS still considers you to be the owner of all of the account assets for Federal Estate Tax purposes, there is still a step-up in basis for account assets upon the death of the original account holder.This alleviates this potential filing requirement. No Completed Gift For IRS Purposes: There is no need to file a federal gift tax return (Form 709) because the IRS does not deem the addition of a joint owner to an account to be a completed gift.For example, if two children are added to the account, the deceased parent will only be considered a one-third owner of the account, thus saving two-thirds of the inheritance tax that would have been due had the account remained in their name alone. The Pennsylvania Inheritance Tax will be further reduced if more than one child is added to the account. However, if a child is added to the same account, at least one year prior to the parent passing away, only one-half of the account value will be subject to the 4.5% PA Inheritance Tax. Reduced PA Inheritance Tax: An account owned in a parent’s individual name will have its full value subject to a PA Inheritance Tax of 4.5% when the account transfers to their child through their estate or revocable trust.This will reduce probate fees in the estate and negate the delay that would result if an executor had to be appointed by the Court to access an individually owned account. This automatic transfer will allow the assets in the account to pass outside of probate. Assuming a parent adds a child to an account as a joint owner, and the parent passes away before the child, the account balance will transfer automatically to the child as the surviving joint account holder. Probate Avoidance: Joint ownership will result in the entire account transferring to the surviving joint account holder.Overall, increased accessibility will provide a level of convenience that might be desirable for individuals who are looking for their children to take on a proactive asset management role as they get older. They will be able to make investment decisions such as buying and selling stocks, bonds or mutual funds. This will allow them to write checks and pay bills from the account, if necessary. Ease Of Access For New Joint Owner: The new joint account holder will have complete access to the account. ![]() As long as you go into the process of changing account titling fully informed, you can make the educated decision as to whether or not this is the best planning approach for you and your family.īenefits Of Adding A Joint Owner To An Account : It will also review some of the cautions that you should be aware of before adding an additional owner to your accounts. This article will outline some of the positives that result from adding someone as a joint owner to an account. SHOULD I ADD A JOINT OWNER TO MY FINANCIAL ACCOUNT(S)?Ĭlients frequently ask me questions about adding children or other individuals as joint owners to their bank or investment accounts.
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