Should shared checking account be taxed when one of the account holdersdies?
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Should shared checking account be taxed when one of the account holdersdies?
My mother recently passed away in PA. My sister had a joint checking account with my mother (her name “or” my sister’s). My mother was in a nursing home for 8 1/2 years and all her SS checks were automatically deposited and then my sister would write a check to the nursing home, since my mother was on Medicaid. My sister closed this account and now is getting a letter from the state of PA asking for tax on half the account. We still need to get a headstone and other expenses on my mothers behalf. Shouldn’t this money legally be my sister’s with no tax?
Asked on January 22, 2011 under Estate Planning, Delaware
Answers:
MD, Member, California Bar / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
Checking accounts can never be "or". The account is in both your mother's and sister's name so it should not even be counted in probate or anywhere since that account is now solely your sister's account. If the bank tried to name this account as an "or", you need to have your sister definitely file a complaint with the agency that regulates that bank. If the bank name ends in N.A., it is the OCC. If it ends is FSB or FSA, then it is the OTS. If it doesn't have one of these endings, it is more likely than not a state chartered bank so you need to check with your state's department of financial institutions. As to the taxation issue aside from the bank account problem, how is it the state can say with certainty it is half? Seems arbitrary to me, so I would first tackle the bank account issue and use that to tackle the taxation issue.
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