Elderly relative created joint bank accts. Balance at death greater than 14K. Are gift tax & estate tax returns necessary? Does the estate need to pay gift tax?

[kalliekaykat]

Joint bank accounts were created in order for the daughter to pay bills. Daughter did not contribute anything to the accounts.  Daughter received sole ownership of the accounts at the death of her dad. The balances are significant.  Does the daughter have to pay taxes on the account balances or does it come out of the estate?  Does she or the estate have to pay gift taxes, or would it be applied to a lifetime exemption?  THanks for any guidance you can provide.  

[Carl]

If the account was opened as "joint tenants with rights of survivorship" (JTWROS) then nothing has to be done or reported, and the account is not part of the estate. It's now the daughter's money, and nothing has to be reported to anyone. The estate will report the income though, and the estate is liable for any taxes due. The surviving joint tenant reports nothing, and pays nothing in the way of taxes to any taxing authority.
The surviving tenant is only liable for the interest on the account, that accumulated and was paid after the other account holder passed. The estate is responsible for taxes on all interest earned and paid before the elderly relative passed.

[kalliekaykat]

Thank you so much!!  I've been worrying myself sick about this.

[LindaBelmont · Accepted solution]

You did not ask about inheritance taxes (different from estate or gift taxes).  The last time I checked there were 6 states with inheritance taxes (Iowa, Kentucky, Maryland, Pennsylvania, New Jersey and Nebraska). Each state imposes their own rules, deductibles and rates.  The fact that it was a joint account may be immaterial. For example, in Pennsylvania all joint accounts with right of suvivorship are subject to inheritance tax.  Normally 50% of the amount of the account is taxed unless the account was opened within a year of the death. Then the entire amount is subject to inheritance tax. Unless you are positive that the state where she died does not have an inheritance tax, I would suggest you go to that state’s DOR website and see if they have one. I believe my list is current, but laws change all the time.

[Carl]

I can't speak for the state level, but at the federal level inheritance taxes are imposed only if the estate exceeds 5.2 million dollars. Generally, state tax laws follow the federal ones. But that's just "generally", and not always true. Still worth checking and confirming though.

[LindaBelmont]

I can't speak to other states but PA has no minimum or deduction. At one time the minimum was $3,000. but now it is $0. Almost every dollar is subject to inheritance tax (including pensions in some cases)..  I just filed a PA inheritance tax.

[kalliekaykat]

thanks everyone.  I live in Texas and don't think there's an inheritance tax, but it is very good information to know.  I sincerely appreciate your taking the time to help me.