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Your Joint Accounts and Estate Tax Planning

Joint accounts are a popular estate planning option, because they allow the quick transfer of assets after a loved one dies. As the surviving joint owner of an account, a person takes complete ownership of that account after proving the death of the deceased joint owner. When the joint owner dies, there are often estate and inheritance tax consequences related to inheriting a joint account.
 
If the joint owner was your spouse, half of the fair market value of the entire joint account will be included in the decedent’s estate. If the joint owner was someone other than your spouse, the fair market value of the entire joint account will be included in his or her estate. After determining how the account will be divided among the owner’s estates, it is important to determine how taxes will be determined.
 
If the deceased joint owner died intestate (without a will), and his or her estate is subject to estate or inheritance taxes on the state or federal level, whether the surviving joint owner is responsible for part of the estate or inheritance tax bill will depend on state law. If the property owned jointly was real estate, the law of the state within which the property is located will control. If the property owned jointly was not real estate, the law of the state where the deceased joint account owner died will control.
 
If the deceased joint owner died testate (with a will), and his or her estate is subject to estate or inheritance taxes on the state or federal level, the apportionment of the tax will be dependent on the provisions contained in the Last Will and Testament or Revocable Living Trust.
 
Importantly, the joint owner of an account is not required to pay any of the joint owner’s final bills. This is true unless you co-signed or otherwise personally guaranteed one of the decedent’s debts. If there is a debt for which you are not sure whether you personally guaranteed, speak with an attorney immediately.

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