SmartAsset
By Eric Reed, December 26th, 2024
My Mom Wants to Add Me to Her $40k Savings Account So I Won’t Owe Taxes When She Passes. Will This Work?
Unfortunately, this scenario may not play out as intended, but it does have some potential benefits.
Taxes on gifts and estates are governed by the same section of the tax code, a joint tax known as the gifts and estate tax. This tax applies to any unilateral transfer, which is defined as giving someone assets without receiving equivalent value in return. Any time you let someone take or use your assets for themselves, without paying you the fair market value for that asset, it is either a gift (if you are alive) or an estate (if you have passed).
For example, say that your mother has a savings account with $40,000 in it. She wants to add you as a joint owner of the account, so that you can take control of the account after her death without owing taxes.
This plan will help you save time and money on the probate process. However, you will still owe any applicable gift taxes if you access the money during her life, or estate taxes once she is dead. Then it becomes a question of whether those taxes apply depending on several other circumstances.
You should consider speaking with a financial advisor if you want professional guidance asset transfers and taxes among your family members, as the rules can get complicated. Here are some basic things to be aware of…
Joint Ownership Does Not Eliminate Taxes— The gifts and estate tax is a tax on any unilateral transfer from one person to another. It applies any time you give someone ownership or control over an asset, so you cannot avoid it by simply making them a joint owner on accounts or title papers.
Eric Reed, Freelance Journalist
