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USTaxAdvising
USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1103
Experience:  US Taxation specialist.
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Hi, For the last ten years I have been the co-tennent

Resolved Question:

Hi,
For the last ten years I have been the co-tennent on an brokerage account with my father - he was primary, and he managed & paid the annual taxes on the account. Then three years ago after my mother died, Dad changed the brokerage account rules so that I was the primary account holder making the investment decisions. (His name remained on the account, in case something happened to me it would revert to him.) I was given full control of the account in terms of investments / divestments / changes of allocations etc. and I've paid the income taxes on the account for for 2010, 2011, and 2012.
A couple weeks ago Daddy passed, without a will, and I'm interested in finding out whether it's right that this brokerage account would be brought back into the estate for valuation purposes. (Thereby raising the estate level to where I'd be required to pay additional taxes).
My question arises because I've been paying the annual taxes and managing the account for 3+ years, and it seems wrong that I would have to pay taxes again on something I've been paying taxes on already. Had I withdrawn and squandered the money I wouldn't owe anything.
My father lived and died in New York State.
Thanks for your time.
Confused
Submitted: 1 year ago.
Category: Tax
Expert:  USTaxAdvising replied 1 year ago.

USTaxAdvising :

Hello, Thank you for using justanswer. I can assist you with your questions today.

USTaxAdvising :

If you were the primary holder of the account and had right to the assets then I would presume that you hold title to them and your father was merely a "beneficiary/signatory" of the account. Thus the account would remain out of the estate as it would be your asset.

USTaxAdvising :

When you mention "co-tenant" do you mean that your father holds 50% of the assets?

USTaxAdvising :

If that is correct then only 50% of the assets would go into the estate.

USTaxAdvising :

Since your father died without a will it will take some time for the courts to determine where the funds will go. This known as "probate."

USTaxAdvising :

If your father still held legal right to 50% of the assets then 50% of the account would go into his estate.

USTaxAdvising :

You need to look at the account documents to see who as legal right to the assets. This will tell you if the assets will go into your father's estate.

USTaxAdvising :

Make sense?

Customer:

I have had full control of 100% of the assets since Oct 2010 when he changed the account. His name remained on the account as a "joint tennent."

Customer:

This term is used by the brokerage firm

Customer:

I have had full control of 100% of the assets since Oct 2010

USTaxAdvising :

Ok just because you have control of the assets does not mean that you have legal claim to all the assets. I would contact the brokerage firm and ask them if all the assets are yours. (i.e. can you liquidate 100% and transfer all the cash to your personal wallet?)

USTaxAdvising :

This is similar to that of an investment advisor. An investment advisor can have full control of your portfolio but cannot transfer cash out of the portfolio to his her back pocket.

USTaxAdvising :

Without your consent that is.

Customer:

The answer to that question was given me by my father the answer is YES, but I never exercised that right. I guess I need to talk to the broker just to verify.

USTaxAdvising :

Yes, the broker will be able to tell you exactly.

USTaxAdvising :

Then you will know what is going to happen to the assets.

Customer:

I signed papers in 2010 making me the primary and giving me investment control, but I guess I better check with him.

USTaxAdvising :

Yes, that would give you the clarity you need. I presume you don't have 100% of the account as you "never exercised that right."

USTaxAdvising :

I hope that helps. Please let me know if I can assist further.

Customer:

I do have total control of the account - my father made sure of that. All directives came through me. not my Dad. He was 91 at the time and wanted me to be making the decisions. At the same time he gave me power of attorney. When I say I never exercised the right, I said it because I'd never throw away something that my father had worked so hard for, and wanted me to use for my retirement years.

Customer:

Some of the others who were given the same opportunities/advantages have blown it all already.

USTaxAdvising :

Understood - I understand what you meant by control. You need to determine if you have legal right to 100% of the account.

Customer:

Thanks you've been most helpful.

USTaxAdvising :

Glad I could help.

USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1103
Experience: US Taxation specialist.
USTaxAdvising and 2 other Tax Specialists are ready to help you

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USTaxAdvising
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