Investment Account

[Lion EA]

My new daughter-in-law's mother asked me how to title money so her daughter has access but no tax consequences now. Investment advisor suggested TOD but told her to ask me! Mother's name and SSN would be on account with mother paying taxes; daughter's name would be on as Transfer On Death. Daughter would inherit with step up (or down) when mother passes? Mother doesn't want daughter liable for taxes during mother's lifetime. Does TOD accomplish what she wants?

(My brand new daughter-in-law lost her father as the newlyweds were flying back from their New Zealand honeymoon and were blindsided upon landing at LAX and learning of his death. That must've been a horrible flight back to the east coast. We spent a few days sitting shiva with them in March in PA. Trying to answer their questions as they arise and ease them through this.)

Thank you for any thoughts, suggestions, advice.

[Kea]

The TOD will keep her from paying current taxes on it but won't give her access to the funds until the mother passes. At that point she will access as soon as she gets the death certificate.

The TOD will not keep it from being reported as part of the estate (if that's even an issue), but will keep it out of probate.

Hope that helps.

[mcb39]

Having been through this, that is my take also. But, wouldn't a POA allow the daughter to access the money NOW if that is what the monther has in mind.?

[jainen]

>>wouldn't a POA allow the daughter to access the money NOW<<

A lot of banks would not honor a power of attorney like that. Why couldn't the mother just do it, perhaps by transfer to a smaller joint account when needed? As Kea said, it would be part of the taxable estate (even if no probate or estate tax return is required) so stocks would get a basis adjustment if mother died.

[Lion EA]

Mother will withdraw if daughter needs, and take the income in mother's name. So, it sounds like the financial advisor had a good plan for them. Thank you everyone for your explanations.

[OldJack]

Well... What is the big deal if the estate will be small and exempt from estate taxes. Why not just make it simple and put the money or account in joint names with the mother receiving the 1099 for income tax. Sure there may be a gift tax return that needs to be filed but not likely any gift or estate tax.

[mcb39]

Mother will withdraw if daughter needs, and take the income in mother's name. So, it sounds like the financial advisor had a good plan for them. Thank you everyone for your explanations.

I am wondering if this Mother would like to adopt me.

[Lion EA]

Anybody in PA on now?. Mother lives in PA. Would there be PA gift tax if mother puts funds in a joint account with daughter now? If the investments grow (mother is only in her 50's) will daughter get step-up on only half the account when mother passes if a joint account? Mother owns an antique inn that she hopes to revitalize, so estate value may be an issue in future years.