Do All Joint Accounts Automatically Pass To The Surviving Owner Of A Joint Accout

hank | Nov 27, 2016 | 110 posts since 2016

it's my understanding that a joint account bypasses probate and automatically pass to the surviving owner. I don't know if this is correct and automatic. It is my understanding that this is the case in NJ. My dad and I now have a joint account at Ally. They are not located in NJ. Does anyone have experience and knowledge in this matter? Thank you

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Shorebreak | Nov 27, 2016 | 4,039 posts since 2010

If an account is owned jointly in the names of two or more people and it's designated "with rights of survivorship," then when one account owner dies the surviving owners will simply continue to own the account. Probate of this type of joint account simply won't be necessary. Instead, all that the surviving owners will need to do is show the bank or investment company a death certificate for the deceased owner and then the deceased owner's name can be removed from the account.

There is however, a potential drawback to using this type of account. If the original account owner adds new owners and the new owners don't contribute any money into the account, then the original owner may be deemed to have made a gift of a portion of the account to the new owners for gift tax purposes. The gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year. For 2016 the annual exclusion is $14,000.

https://www.thebalance.com/joint-pod-probate-problems-3505234

hank | Nov 27, 2016 | 110 posts since 2016

I have a book on estates called jk lasers rules for estate and tax planning. it says there is no taxable event by just adding a child to a parent's bank account. There is only a gift the moment the child makes a withdrawal. I don't plan to make any withdrawal. Does anyone know more about this? I don't want to do anything that will trigger taxes

hank | Nov 27, 2016 | 110 posts since 2016

It says the same thing at this website, that there is no gift tax applicable if the child doesn't withdraw funds.

http://www.journalofaccountancy.com/issues/2009/feb/creatingjointownership.html

Purplesage | Nov 27, 2016 | 179 posts since 2010

I had a joint checking account "with rights of survivorship" with my mother. Upon her death I just went to the bank and presented her death certificate and they removed her name from the account. No gift tax was applicable in this case since the amount was below the annual exclusion for that year.

Ally6770 | Nov 27, 2016 | 4,292 posts since 2010

The annual amount does not apply in an inheritance.

Shorebreak | Nov 28, 2016 | 4,039 posts since 2010

https://www.irs.com/articles/inheritance-and-gift-taxes

Bozo | Nov 28, 2016 | 1,375 posts since 2011

Hint: there is a difference between the reporting threshold and the tax threshold. Even though one might be required to file a gift tax report, no tax is owed unless the aggregate lifetime exclusion of $5 million+ is exceeded. Stated another way, just because you might be over the reporting threshold doesn't mean you owe tax.

highrate | Nov 28, 2016 | 46 posts since 2016

if that is true, then is there a penalty for failing to report a gift that exceeded14000 in a given year, if there is no tax due?

Ally6770 | Nov 29, 2016 | 4,292 posts since 2010

Penalty for Late Filing. If you owe gift tax and do not file a return, the monthly penalty starts the day after the return was due. The IRS will assess a 5 percent monthly penalty on the unpaid tax until you file the return and pay the tax. The penalty is capped at 25 percent of the net tax amount. If you do not file the return for 60 or more days, the penalty is the lesser of $100 or 100 percent of the unpaid tax amount.Additional Fraud PenaltyIf the IRS decides the reason you did not file was to avoid paying taxes, an additional fraud penalty of 15 percent is assessed per month. The fraud penalty is capped at 75 percent of the net tax due.Penalty for Gift UnderreportingIf the gift’s fair market value is significantly undervalued on the tax return, the IRS will assess an under-reporting penalty. A 20 percent penalty is imposed if the gift is undervalued by 50 percent or more and the tax underpayment is greater than $5,000. A 40 percent penalty is imposed if the gift is undervalued by 75 percent or more and the tax underpayment exceeds $5,000. The IRS charges interest from the first day the tax return was due until all taxes and penalties are paid in full.

hank | Nov 29, 2016 | 110 posts since 2016

that is definitely very scary

Ally6770 | Nov 29, 2016 | 4,292 posts since 2010

This penalty is only if you do NOT file and OWE a gift tax.

Ally6770 | Nov 28, 2016 | 4,292 posts since 2010

The annual gift amount has been $14,000 per person not $13,000. $14,000 started on January 1, 2013. This includes all cash including birthdays, Christmas etc.

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