From: ask@cbnews.cb.att.com (Arthur S. Kamlet)
Subject: Re: Joint Acct vs single account with beneficiary
Organization: AT&T Bell Laboratories,  Columbus, Ohio
Distribution: usa
Date: Tue, 6 Oct 1992 20:09:31 GMT

In article <25979@oasys.dt.navy.mil> tobias@oasys.dt.navy.mil (Steve Tobias) writes:
>
>    Questions re a joint bank account in the name of a parent and his/her
>child vs. an account in a parent's name with the child as beneficiary
>(i.e. payable on death):
>


It seems like you are asking a lot of very specific questions when
you really want ot know how you can keep money out of probate. Oh
well, I'll try to answer.

A joint account where either party can withdraw the funds at any
time -- this is usually  a Joint Tenancy with Rights of Survivorship-
can easily be set up at any bank.  Either party can add or withdraw
funds and close the account.  At death of either party, the other
automatically gets the funds.  All that is necessary is to present
the bank with proof of death, and proof of who you are.  Some
states will also require a tax release from the State so that State
taxes -- if any -- will be paid, and a proof of residency form to
establish the state of residence of the deceased party.  But you
will not need a court order to receive the funds.  Since this was a
joint account wros, the funds automatically poass to the survivor
and do not pass via will/probate.

For federal estate tax purposes, the IRS could assume that 100% of
the funds in the account were yours and thus in your estate, and the
burden of proving otherwise rests on your estate and/or the joint
account holder.  So placing funds in a joint account is not
assurance of escaping estate taxes.

Since either party can draw 100% of the funds at any time, 100% of
the funds you add to the account are considered to be a gift, and if
they exceed $10,000 per year, you are required to fill out a
gift/estate tax form.

There are other types of Joint accounts, such as Tennants in Common
where the deceased party's portion passes to his estate and not to
the survivor.  Some states allow a Tenants in the Entirety account.

The type  of POD account you talk of, Mary Doe In Trust For John
Doe  (Or sometimes Mary Doe - payable on death (POD) to John Doe)
is very similar to joint accounts wros -- on Mary Doe's death
the funds are the property of John Doe and are not passed via
will/probate (Unless of course none of the parties survive) and
are NOT subject to gift tax since the trust account can be revoked
at will and since the POD party cannot draw the funds until
after Mary Doe's death. But on the other hand the entire amount is
part of Mary Doe's estate for tax purposes.  Since the lifetime
unified tax credit is applied to both gifts over $10,000 and also
estate funds, it would be better if the funds were treated as gifts
of under $10,000.  Neither of these accounts really solve the entire
probate/tax issues you have raised, and a lawyer might offer other
solutions for what you are looking for.


>- Assuming parent is source of money, does setting up joint account with
>child make money subject to gift tax if it's >$10,000?

If it is a joint account, and the child can draw the entire amount,
then the entire amount is a gift.  The annual additions over $10,000
must be reported.  A POD/ITF account is NOT subject to gift tax but 
is all part of your estate.


>-Is going through probate (i.e. getting ripped off by probate attorney)
>avoided in either type of account upon death of parent?

Yes.  But if the estate is really large, there's the work to prepare
federal and state estate tax returns which include these accounts.

Not all states have terrible probate procedures.  Check your state.

>-re my "ripped off" comment above, maybe I'm wrong, though I doubt it.
>What is typical legal fee: flat charge, percentage of $ involved...??
>For example, for a bank account in parent's name only, $XX, no beneficiary
>named (except in will), what percentage of XX would probate attorney get?

Depends --- the more the estate the higher the percentage -- 2-6% of
the estate is not unusual, and in any case the probate court will
probably want to approve the lawyers fees.

If the estate is not too complicated, and it is a small estate, the
executor can handle it all without a lawyer.  Usually the clerks in
the probate court will show you the forms to file, how to file,
etc.

It is also possible to find a lawyer who charges for time and
expenses and Not as a percentage of the estate, but good luck
finding one like that.


>-Is a federal tax involved only if total inheritance is over $600,000?


Genrally yes.  And if there's a surviving spouse who gets all the
money the tax is postponed while the spouse is alive.  If there are
also children, a living trust with some A/B Tax provisions can save
taxes as well.
-- 
Art Kamlet  a_s_kamlet@att.com  AT&T Bell Laboratories, Columbus
Newsgroups: misc.legal,alt-dads-rights,alt.child-support,soc.men,soc.couples