> When two people own a bank account, and one passes away, the other person gains full ownership but there's no inheritance and no taxation.
It wouldn't go through probate, but it would still subject to estate tax. Similarly, any withdrawals before death would be subject to gift tax. Other forms of common property would just be subject to gift tax immediately upon naming the co-owner.
Relevant bits of §25.2511-1(h):
> If A creates a joint bank account for himself and B (or a similar type of ownership by which A can regain the entire fund without B's consent), there is a gift to B when B draws upon the account for his own benefit, to the extent of the amount drawn without any obligation to account for a part of the proceeds to A.
> If A with his own funds purchases property and has the title conveyed to himself and B as joint owners, with rights of survivorship (other than a joint ownership described in example (4) but which rights may be defeated by either party severing his interest, there is a gift to B in the amount of half the value of the property.
I'm concerned you're overlooking something here. When a husband and wife have a joint account, are withdrawals before death by either party usually taxed?
§25.2511-1(h) of what? It's better to include full references; not everyone on HN is in the USA.
Sorry, it's §25.2511-1(h) in Title 26 of the C.F.R., which contains regulations created by the Treasury.
In the spouse scenario, technically the withdrawals would be subject to gift tax, but the entire amount can be deducted if the spouse is a U.S. citizen. And the gift tax paperwork (Form 709) doesn't actually have to be filed (unless there were other gifts).
It wouldn't go through probate, but it would still subject to estate tax. Similarly, any withdrawals before death would be subject to gift tax. Other forms of common property would just be subject to gift tax immediately upon naming the co-owner.
Relevant bits of §25.2511-1(h):
> If A creates a joint bank account for himself and B (or a similar type of ownership by which A can regain the entire fund without B's consent), there is a gift to B when B draws upon the account for his own benefit, to the extent of the amount drawn without any obligation to account for a part of the proceeds to A.
> If A with his own funds purchases property and has the title conveyed to himself and B as joint owners, with rights of survivorship (other than a joint ownership described in example (4) but which rights may be defeated by either party severing his interest, there is a gift to B in the amount of half the value of the property.