Advanced Underwriting Consultants

Question of the Day – April 23

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.  What are the gift tax and income tax consequences of that transaction?

Answer: There probably aren’t any results right now.

The income and gift tax consequences related to a nonqualified brokerage account owned jointly depends on who put the money in.  In general, if the parties are not married, the ownership of the account for tax purposes stays with the donor.  In the situation described above, Mom put in all the money.  Mom still is considered to be the owner the account from an income and gift tax perspective.

If the current brokerage custodian accepts just one signature for withdrawals, Mom should be able to get the money out without gift tax or administrative issues.  If part of the account needs to be liquidated, Mom will recognize an income tax result when the underlying securities are sold.

On the other hand, if Son gets a cash distribution from the account, that will be considered to be a gift taxable distribution from Mom to Son.

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.