Advanced Underwriting Consultants

Question of the Day – April 20

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question: My 80 year old client has put her 50 year old son on as a joint tenant with right of survivorship (JTWROS) on her brokerage account.  Will the son get a step-up in basis in the account at his mother’s death?

Answer: Probably yes.

With regard to an account titled JTWROS, Revenue Code Section 2040 says that the first joint owner to die must include the entire account in her taxable estate, unless it can be proved that the survivor contributed to the account.  In this example, if Mom dies first and the account was sourced from her assets, the entire account would be included in Mom’s estate.  Son would receive a full step-up in basis in the account.

If Son contributed some of his own money to the account, only the part attributable to Mom’s pro-rata share would be included in her estate—and thus only the same part would eligible for step-up at her death.

The rules about step-up at death are different if spouses are the joint owners.  In that case, at the death of the first spouse, half the value of the asset is included in the estate of the decedent, and the survivor gets a half step-up.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.