Discussion:Joint bank account, gift tax, and estate tax

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Discussion Forum Index --> Tax Questions --> Joint bank account, gift tax, and estate tax


Rlw (talk|edits) said:

8 January 2006
In 2005, elderly taxpayer A adds younger relative B to a bank savings account, creating a joint account in the state of New York. The purpose is twofold: (1) to provide funds for B to use for A's care if needed in later years and (2) to pass assets from A to B outside of probate upon A's death.

I'm trying to find the gift/estate tax implications of this.

The instructions for Form 709 say

If you create a joint bank account for yourself and the donee (or a similar kind of ownership by which you can get back the entire fund without the donee's consent), you have made a gift to the donee when the donee draws on the account for his or her own benefit. The amount of the gift is the amount that the donee took out without any obligation to repay you.

I read this to say that if B withdraws funds to care of A, that this is not a gift, because the money isn't used for B's benefit. So no form 709 need be filed unless B takes out money for his own use, greater than the annual gift exclusion amount. Right?

Then what happens upon A's death? As A's executor, how does B report the remainder of the account which has become his? Does this go on a Form 706 for A's estate?

I know nothing about NY state taxes. Are there implications there, as well?

Riley2 (talk|edits) said:

9 January 2006
No, this goes on Schedule E (joint interests). Since this is a nonspousal joint tenancy wherein A provided 100% of the consideration for the account, the account would be fully includible in the gross estate.

Rlw (talk|edits) said:

9 January 2006
Thanks for the reply, but I'm confused. I thought that gifts and inheritances received are not taxable to the recipient. Only income produced by such received assets is taxable. So I'm missing where Schedule E is required.

Riley2 (talk|edits) said:

9 January 2006
Gifts are not subject to income taxes, but are subject to gift and estate taxes.

Rlw (talk|edits) said:

9 January 2006
Right. So why would anyone have to file schedule E if income taxes don't apply?

Who do you think needs to file schedule E: A, the donor, or B, the donee?

I would have thought that filing a 709 and/or 706 would suffice.

Rlw (talk|edits) said:

13 January 2006
Anybody? I'm still wondering whether Schedule E is truly required.

Riley2 (talk|edits) said:

13 January 2006
Upon death, joint interests are reported on Schedule E of Form 706.

Rlw (talk|edits) said:

13 January 2006
Oh, that Schedule E! Without further disambiguation, I assumed you were talking about Form 1040 Schedule E.

Earlier, you said, "No, this goes on Schedule E" when I asked "Does this go on Form 706?"

I would have understood better if you'd said "Yes, this goes on Form 706 Schedule E."

Sun (talk|edits) said:

11 May 2006
What is consider gift for the parent given money to the kid who is a minor. I have a client, he wants to gift to his kid the annual exclusion amount by open a bank account. Since the kid is under 18 years old, so the parent's name still would be under the bank account and the kid as minor. That means the parent still can access the account. If it is a gift, can the parent use the money on that account? If he use the money on that account, will that defeat the gift purpose?

Sun (talk|edits) said:

11 May 2006
Another question. Does any body know what is Uniform Gift account?

Riley2 (talk|edits) said:

11 May 2006
The gift is complete when the deposit is made into a UGMA or UTMA account.

If the parent is acting as custodian under the UTMA or UGMA, the account would also be included in the gross estate of the parent if the parent should die before the child reaches the age of majority.

Aeren (talk|edits) said:

29 March 2007
I have a question. What if B withdraws the entire amount held in the joint account but then gives it back to A in full at another point in time? Do the appropriate papers still have to be filed to the IRS?

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