A New York Estate is subject to potential estate tax under both Federal and State law. Whether an estate is potentially taxable and requires the filing of an Estate Tax Return depends primarily upon the value of a decedent’s gross estate. In general the gross estate is comprised of all of the assets that a decedent owned at the time of his death including all items passing under a Last Will or by intestacy as well as items transferred by operation of law. These latter items include assets that are owned jointly with others or which have named beneficiaries such as retirement accounts and life insurance. For example, assume that a decedent left a Will and the value of the assets that were part of his probate estate were $1 million. In addition, assume that the decedent had joint assets such as real estate or bank accounts with a value of also $1 million. Thus, the gross estate value appears to be $2 million dollars.
When joint assets are part of a decedent’s financial portfolio, an issue arises as to what percentage or pro-rata portion of the joint asset should be included in the decedent’s gross estate for estate tax purposes. In cases where the other joint owner is not the decedent’s spouse, Section 2040 of the Internal Revenue Code presumes that the full value of this joint asset was owned by the decedent and should be subjected to the estate tax.
This presumption can be rebutted by evidence that shows that the surviving joint owner actually made contributions toward the purchase or value of the asset. However, in many instances the decedent’s death occurs many years or decades after the property or asset is purchased or established. Thus, documents that may show which joint tenant contributed funds to the establishment of the asset may no longer exist or may be very difficult to locate.
It should be recognized that where an asset is held jointly between spouses, the estate tax laws only require that one-half of the value of the property be included in a decedent’s gross estate. This avoids the problem of full inclusion. Also, the asset passes to the joint owner spouse which qualifies for the estate tax marital deduction and does not result in the imposition of any estate tax.
New York estate planning lawyers are familiar with discussing the issues regarding the assets owned jointly with other individuals. I have reviewed many estate plans and estate asset records where issues regarding joint assets potentially cause unwanted results. It is important to recognize the tax consequences of creating a joint asset as well as the facts relating to the survivorship aspects which result in the joint owner automatically becoming the beneficiary of the decedent’s interest at death. As pointed out in earlier posts in the New York Probate Lawyer Blog, joint assets need to be considered in planning since they are generally not controlled by a Last Will.
New York Probate Attorney Jules M. Haas has helped many clients over the past 30 years resolve issues relating to estate planning, estate accountings and estate settlement in Manhattan and Queens and throughout New York. If you or someone you know has any questions regarding these matters, please contact me at (212) 355-2575 for an initial consultation.
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