Tax Impact of combining my wife and my investment accounts?

[randyw57]

My wife has an Investment (non-IRA) account at Fidelity.

I have an Investment (non-IRA) account at Fidelity.

We would like to combine those accounts.

Either transferring the assets from one account to the other.

Or transferring assets from both account to a third account.

We want to understand any tax impact to doing something like that.

Thanks for any help or advice!

[Bsch4477]

When you transfer "in kind," you simply move your investments to us "as is." There's no selling or buying involved and no tax consequences either.  That is, you transfer the same assets without first selling them. 

[Critter-3]

There is no tax advantage to merging the 2 accounts together  but you could house them both at the same broker for simplicity.  In fact many couples keep them separate in case they want/need to file separately in the future.   Just make sure each account has the current  beneficiaries listed.  

[randyw57]

Thanks, Bsch4477!

I understand about ‘in kind’ transfers.

This may be a little different.

Let me see if I can give an example:

I have an account named ‘Husband’ with my social security number for taxes.

My wife has an account named ‘Wife’ with her social security number for taxes.

Can I transfer (not sell/buy) the assets currently in Husband to Wife without tax impact?

It just seems that from the IRS perspective something taxable might have happened in the Wife account after that transfer.

Critter-3: the accounts are already housed at the same institution - Fidelity.
We don’t expect a tax advantage. The concern is a tax impact.

We’ve filed jointly for 50 years. We don’t expect that to change.

The biggest reason to do this is to simplify our lives. And more specifically simplify my wife’s life if I wasn’t around. 

Thanks for the help. If I can provide additional information, just let me know!

[Bsch4477]

What does Fidelity say?

If Fidelity can’t do it for some reason you could have one of you gift all of the assets in kind to the other and close the empty account.

 The unlimited marital deduction is a provision in the U.S. Federal Estate and Gift Tax Law that allows an individual to transfer an unrestricted amount of assets to their spouse at any time, including at the death of the transferor, free from tax.

[Mike9241 · Accepted solution]

assuming each a/c is only in one name, yes you can make the transfer without tax consequences. spouses may make unlimited gifts to each other. no gift return is filed unless one of you is not a US citizen.

however, you do not seem to be simplifying your lives if one a/c is H and one a/c is W. transferring from one to another would mean the will or inheritance laws of the state would dictate who gets the a/c on the owner's death.  I would think this is not what you want. so you both can contribute your a/c s to a new one with joint tenancy with the right of survivorship.    if the owner dies intestate then state laws determine the outcome. 

there are no tax consequences to this and the tax basis carries over. 

[Critter-3]

A consultation with an elder attorney to make sure you have all your ducks in a row would be wise.  

[randyw57]

Thanks, Critter-3.

We’ve been there. 

They just don’t want to advise on tax related issues.

Which is what brought me here. 

[Critter-3]

Combining accounts has no income tax relevance as posted earlier.  Making sure your estate/will or living will/ trust/POA  and healthcare surrogate is in order is the important things.  

Depending on the size of the broker/bank  accounts and what you are invested in may require separate accounts at separate banks due to FDIC issues.  

[randyw57]

Hi, Bsch4477!

Fidelity said they couldn’t advise on tax issues.

The Unlimited Marital Deduction seems like it would cover us.

Thanks.

[randyw57]

Hi, Mike9241!

You are right about the joint account.

I tried to make my example as simple as possible.

In reality there are multiple account involved for both of us.

And we have a joint account that we would like to be the target for all of this activity. 

This is good news. Thanks for the help!

[macuser_22]

One thing to keep in mind is if there are securities that were purchased with your own funds (not community income) such as before your were married or using inherited money.    Then if you die the cost basis of the securities is the market value on the date of death if in your name only and inherited by the spouse but if transferred into s joint account it is your original cost basis.      That can make a huge difference in the tax that the surviving  spouse must pay when selling the securities.

That is a common issue with old securities that were purchased for a very low price but are worth a lot now.