What to do about the distribution of a joint bank account upon the death a co-owner?

Get Legal Help Today

Compare Quotes From Top Companies and Save

secured lock Secured with SHA-256 Encryption

What to do about the distribution of a joint bank account upon the death a co-owner?

My mother has a bank account in her name and my name as a joint owner (with me as the sole beneficiary) for the purpose of providing a cash gift to her grandchildren upon her death. The amount in the account at this time exceeds $20,000 and I have been instructed to distribute $1000 to each grandchild and the remainder is to be split equally among her surviving children. Who is responsible for taxes on this money? Will the money in this account have to be distributed by the executor (my sister) or will I be able to do this since I am a joint owner of this account?

Asked on January 2, 2013 under Estate Planning, Virginia

Answers:

Catherine Blackburn / Blackburn Law Firm

Answered 11 years ago | Contributor

The arrangement you describe is not the best way to accomplish your mother's wishes.  Since you are listed as a joint owner of the account and the sole beneficiary, you own it.  When your mother passes away, you have no obligation to distribute anything to anyone.  You can, of course, follow your mother's wishes, but you are not required to do so.

When your mother passes away, this account belongs to you.  If you distribute funds to others, those funds are gifts.

In 2012, the first $13,000 given as a gift is excluded from the gift tax.  This amount increases to $14,000 in 2013.  If you give more than this to one person in a year, you are required to file a gift tax return.  In addition to this yearly exclusion, there is a lifetime gift & estate tax exemption.  The "fiscal cliff" bill passed last night in Washington keeps the $5million estate tax exemption.  I have not seen the actual bill or a detailed analysis of it, but I expect it will continue the current tax law that each person has a $5million lifetime gift & estate tax exemption.  This means, you will not owe gift tax if you give money to the grandchildren and children.  If you give more than $14,000 in 2013, you will have to file a gift tax return but will owe no tax.

A better way to structure your mother's intention would be to create a revocable living trust and either place the bank account in the trust or make the trust the sole beneficiary of the bank account.  Your mother could appoint you as the initial or successor trustee.  In this way, you would distribute your mother's money, not yours.  It would not be a gift from you.  You would also be required to distribute it according to the terms of the trust and could not keep it for yourself.  A trust operates outside any estate, so it would not be necessary to open an estate to transfer these funds.

If your mother considers creating a trust, I strongly recommend she consult with a life or estate planning lawyer.  It is important to consider all aspects of her circumstances (including any potential creditors and real estate) in order to prepare a plan that works seamlessly to accomplish her goals.


IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

Get Legal Help Today

Find the right lawyer for your legal issue.

secured lock Secured with SHA-256 Encryption