Retired Tax Preparer Question

[MsTabbyKats]

Hi-

I used to be active here until I retired....5 years ago.

I have a question....hopefully a simple question.

If I open a brokerage account for me (my SS#) and my son...a joint account....would my contributions counts towards his "annual gift allowance" of $15,000?  If so...would it be 50% of the contribution, since it would be 50/50 ownership?

Thanks!

 

 

[Lee B]

What are you trying to accomplish? Do you want it to be a gift or not?

[MsTabbyKats]

27 minutes ago, cbslee said:

What are you trying to accomplish? Do you want it to be a gift or not?

I want  to have a joint acct with him....so if/when I die, it will be in his name.  Meanwhile I want my SS# on it so I pay the tax.  That's it; nothing complicated.

My question is "are the funds that I put in part of the allowable gift to him?"  We already give me $30K/yr.  If this money adds to "the gift" I can just as easily make it a joint account with my husband and son becomes the beneficiary.

[Margaret CPA in OH]

Good to 'hear' from you, Ms. TabbyKats.  Hard to believe it's been 5 years.  I hope they have been good ones.

Perhaps just make the account payable or transfer on death to your son.  That is what we have done for our accounts and house.

[MsTabbyKats]

49 minutes ago, Margaret CPA in OH said:

Good to 'hear' from you, Ms. TabbyKats.  Hard to believe it's been 5 years.  I hope they have been good ones.

Perhaps just make the account payable or transfer on death to your son.  That is what we have done for our accounts and house.

Thanks....yeah, I think I'll just make him the beneficiary. 

Yes...5 years.  Sold the business Oct 2015.

[jklcpa]

I agree with Margaret.

To answer your question though, yes, 1/2 of the deposit into a new brokerage account would be considered a gift to your son if putting his name on the account.

A benefit to doing as Margaret suggests is that if the account is in your name, at your death and transfer, your son would get a step up (or down) in basis and wouldn't pay income tax on that growth if he sold it.

[Lion EA]

Hi, MsTabbyKats! Nice to hear from you again. Stop by once in a while to catch us up on your life. Stay well.

[Sara EA]

This should be treated the way a checking account is when a parent puts a child's name on it.  There is no gift if the parent funded it and the child does not withdraw anything for his or her own use.  Only when the child takes money out does it become a gift.  Still, since it's a brokerage account, best to make the child a beneficiary so there is step-up basis.

[Catherine]

Hi, @MsTabbyKats - I've nothing further to add, but it's nice to hear from you.  Hope that you are doing well.

[jklcpa]

@MsTabbyKats, Sara is correct that it isn't a completed gift until the son would withdraw from the account, but it would still be better for your son to get the step up in basis.

@Sara EA, thanks for catching my error.

[MsTabbyKats]

Thanks for the well wishes and advice.

As far as "the account"...with 95% accuracy, my son would never take money from this account (he lives well within his salary....one might call him frugal)....it would definitely be best to just name him beneficiary.  Hopefully it will end up  a "large account" because an annuity distribution will be contributed monthly "forever".  (Annuity has low tax cost basis and high current value....tax nightmare...so I'm spreading it over as many years as possible.)

Until 2020 retirement was great...lots of cruises, shows, restaurants....the good life.  Now...supermarket, tv...etc

The best thing about retirement is that I don't have to keep up with tax changes!